If you have serious debt and have reviewed all other debt relief options, bankruptcy may be the option of last resort that allows you to get a fresh start.
While bankruptcy does erase most debts completely, it creates a public record that typically stays on your credit report for 10 years. This can make it hard to be approved for a car loan, home loan or refi, obtain life insurance, or even, in some cases, be hired for a job.
Wherever you are in assessing your situation, it's important to know that there are several debt relief options that may be available to you and you should consider each of them carefully.
Particularly, because of the long-term financial implications of a bankruptcy, it's important to carefully consider bankruptcy before proceeding.
As with all serious financial decisions, get professional advice to evaluate both the immediate benefits and long term affects of bankruptcy.
There are several scenarios where a bankruptcy may be the debt relief option that best meets your needs: - Your debts run into the tens of thousands of dollars and far exceed your ability to pay them off.
- You have tried your best to get better terms from creditors and can't find a bankruptcy.
- Creditors are closing in on you,and you are facing possible foreclosure or other legal proceedings.
Types of Bankruptcy
There are two main types of bankruptcy: Chapter 7 and Chapter 13.
Chapter 7 is a straight bankruptcy and requires a liquidation, or sale, of all assets that aren't exempt.
Chapter 13 allows people with a steady income to keep ownership of property, while a court approved payback plan is arranged over a duration of 3-5 years.
New Bankruptcy Law
A new bankruptcy law went into effect in October of 2005. Under this law, people are now required to get credit counseling from a government approved organization within six months of filing for bankruptcy.
In addition, in order for debtors to qualify for filing a Chapter 7 bankruptcy, it's required that individuals earn less than their state's average income. Those that earn more than the state average are still allowed to file Chapter 13 bankruptcy.
Other notable changes in the bankrupcty law:
- The time period required to payoff Chapter 13 debts has been increased from three to five years, meaning that Chapter 13 filers will have to pay back a higher percentage of owed debts.
- Debtors will now have to pay back in full any auto loans made within 30 days of bankruptcy
- People can only file Chapter 13 Bankrupty every two years. In the past this restriction was not in place.
- In addition, because the new bankruptcy law includes the average income requirement, along with related income provisions, pay stub and tax return requirements, legal fees may be higher for bankrupcty.
Regardless of your situation, it is important to get all the facts on any debt relief option, including bankruptcy. The Debt Relief Center helps individuals in debt find debt relief alternatives to bankruptcy.
So that we may assist you, go to the top of this page, and take a moment to list the type of debt you have and the amount you owe, and the Debt Relief Center will attempt to locate a company that may be able to help you find a debt relief alternative to bankruptcy.
