Bankruptcy NEWS

Personal bankruptcy

Published by admin on December 27, 2009

Personal bankruptcy is the debt management option of last resort because the results will last for a long time and and they are far-reaching. People who are governed by the rules of bankruptcy receive a discharge — based on a court order — that says that you do not have to repay some debts. However, bankruptcy information (date of your filing and later discharge) stays on your credit report for 10 years and may be difficult to obtain credit, get a mortgage, a life insurance, or sometimes get a job. Still, bankruptcy is a legal procedure that offers a new beginning for people who get into financial difficulties and can not repay their debts.

There are two basic types of personal bankruptcy: Chapter 13 and Chapter 7 Each must be filed in federal bankruptcy court. As of April 2006, the filing fees cost $ 274 to Chapter 13 and $ 299 for Chapter 7 Attorney fees are additional and may vary.

Effective October 2005, Congress radically changed the bankruptcy laws. The net impact of these changes is to give consumers more incentive to seek bankruptcy relief under Chapter 13 rather than Chapter 7. The difference is that Chapter 13 allows people with steady income to keep assets such as a house or car, which would otherwise be lost through the bankruptcy proceedings. In chapter 13, the court approved repayment plan, which allows you to use your future income to repay their debts within three-to-five-year period, rather than surrender any property.

Chapter 7 is known as straight bankruptcy, and involves liquidation of all assets that are not exempt. Exempt property may include automobiles, work-related tools and basic household equipment. Some of your property may be sold by a court-appointed official – the trustee – or turned over to the creditor. The new bankruptcy law has changed the time during which you can get through a chapter 7 discharge You must wait 8 years after receiving performance in Chapter 7 before you can file again under that chapter. Chapter 13 waiting period is much shorter and can be as little as two years between filings.

Both types of bankruptcy may get rid of unsecured debts and stop foreclosures, repossessions, garnishments and utility shut-offs, and debt collection activities. Both also provide exemptions that allow people to keep certain assets, although exemption amounts vary by state. Note that personal bankruptcy usually does not erase child support, alimony, fines, taxes and certain obligations, such as student loans. And if you have an acceptable plan to catch up with your debts under Chapter 13, bankruptcy usually does not allow you to keep property when your creditor has an unpaid mortgage or security lien on it.

Another major change to bankruptcy law includes certain obstacles which the consumer must clearly before filing for bankruptcy, no matter what the chapter. You must get credit counseling from a government-approved organization within six months before the file for any bankruptcy relief. Also, before you file Chapter 7 bankruptcy case, you must meet the “income test.” This test requires you to confirm that your income does not exceed a certain amount, which varies by state.

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