Personal Bankruptcy Questions

One should never take financial decisions likely, and that’s definitely true when it comes to bankruptcy.  Before you declare personal bankruptcy, you must consider all of your options carefully with the help of a financial adviser and ultimately a bankruptcy lawyer.  Of course, if you’re struggling with your finances as it is, you may find it difficult to spend any money on counseling services.

In that case, you need to do your best to read up on the subject on your own and learn as much as possible before proceeding.  You should take steps such as reading articles like this one as well as books at your local library or used bookstore.  Knowing what you’re getting into is crucial to your financial future.  Once you have some preliminary research done, you need to talk to a bankruptcy lawyer about how to proceed.

First of all, you should be aware that there are two major forms of bankruptcy that most people consider.  Chapter seven bankruptcy is probably what you have in mind when you think about bankruptcy, since its purpose is to get rid of your debts completely (called discharging).  This means that you don’t have to worry about any kind of repayment program, but some kinds of debts will not be wiped out.  Debts which are not eligible for discharging include child support payments as well as student loans and income taxes (at least in most cases).

The other type of bankruptcy you may have heard of is chapter 13 bankruptcy.  Unlike chapter seven, declaring chapter 13 does not do away with your financial obligations.  Instead, you work with the bankruptcy court to develop a payment program that is reasonable for the next few years.  Even so, most of the time you don’t end up paying all of your debts.  Your creditors might end up getting, say 70% for example, of what you originally owed them.

There are several other kinds of bankruptcy which you probably don’t have to worry about.  They mainly apply to corporations and other special circumstances.  You should keep in mind that chapter seven bankruptcy has become more difficult, but not impossible, due to the recent changes in the bankruptcy statutes.

Basically, you’ll have to prove that you cannot afford to pay all of your debts while maintaining a reasonable standard of living.  This particularly applies to people who make a salary greater than the median wage for their state.  Otherwise, you don’t have to worry about this because it’s pretty clear that you don’t make a lot of money to begin with.

You should know that chances are you’ll still qualify for chapter seven bankruptcy under the new statute.  Even if you don’t, you may be able to file chapter 13 bankruptcy, which gives you some breathing room by developing a long-term payment agreement.