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It has become an alarming fact that the number of people who are filing for bankruptcy is increasing. It has something to do with the current problem in the economy. Before this crisis, Americans are able to fulfill a very luxurious lifestyle because of the abundance of resources. There were plenty of jobs and businesses can easily generate revenue. Because of this, people had loans here and there because they knew that they can pay for it. Now that the economy dropped, it affected most of us. There was a significant decrease in employment and companies had to cut down their expenses thus cutting the number of employees. Because of this, more and more people are struggling to pay for their debt.
What is bankruptcy?
When people are not able to pay their outstanding debts, bankruptcy is filed. This is a legal process wherein you are informing the government that you do not have the means to pay them off because of financial problems. So instead of evading from your responsibilities and committing a crime, you can just come clean and you will be assisted.
How can filing bankruptcy help me in my financial crisis?
The bankruptcy court will evaluate your situation. If they see that you really can not pay your dues, they will make an arrangement with your lenders to discharge the full or just a partial amount of your debt. It will depend on what type of bankruptcy chapter you will be approved of.
What are the bankruptcy chapters that are available to me?
There are two types of bankruptcy chapters that you can look into, Chapter 7 and Chapter 13. Chapter 7 is when your income really can not cover your bills and the only way you can repay lenders is to liquidate your assets meaning you have to give what you own for them to convert it as cash and consider it as a payment. After this, your lenders can now discharge the full amount of your debt and you will not be responsible anymore. Chapter 13 on the other hand is you still can pay for your debt but it is really difficult for you to manage. You will be proposing a payment plan with the bankruptcy court where you will be following diligently. Afterwards, if it has been approved, your lenders can discharge some of your loan debt.
How will I know which chapter I can apply for?
It will depend on your situation and what would be the best for you. Every state has a different way of evaluating bankruptcy cases. It would be best for you to discuss these details with your attorney.