According to the National Bankruptcy Center, in 2009 1.41 million Americans filed for personal bankruptcy. Job losses and decreased income nationwide fueled the surge in filings, which showed an increase of over 32% from the year before. With more and more people feeling the weight of debt, many are asking if bankruptcy is an option for them. As personal bankruptcy can be a complicated issue, it helps to understand a few basics.
What is personal bankruptcy?
Personal bankruptcy is a provision of federal law that helps to protect an individual from the burden of overwhelming debt. When income is no longer sufficient for a person to make scheduled payments, such as mortgage, medical bills or credit cards, filing bankruptcy may allow you to renegotiate or discharge some of this debt to make it more manageable.
What types of personal bankruptcy are available to me?
There are a variety of forms of bankruptcy. However, for individuals filing a personal bankruptcy, the most common types are Chapter 7 and Chapter 13.
In Chapter 7 bankruptcy, an individual’s non-exempt assets are sold or liquidated in order to provide payment to creditors and remove some types of debt. Depending on the rules of your state, some assets may be exempt from liquidation and, therefore, retained.
In Chapter 13, an individual enters into a 3-5 year repayment plan with their creditors. Unlike Chapter 7, this type of bankruptcy does not require an individual to liquidate any non-exempt assets. In some instances, debt amounts can be renegotiated or discharged.
Am I eligible to file for bankruptcy?
Chapter 7 eligibility is determined using a test called the means test. This formula will compare your living expenses against your income to determine your ability to repay debts. If, according to the rules of your state, your remaining income is insufficient for debt repayment, you may be eligible.
Chapter 13 requires that an individual have enough income to repay their debts. As this form of bankruptcy is used to allow an individual to settle debts without losing assets, income must be sufficient to make agreed upon payments. Also, your debts must not exceed $360,475 in unsecured debt and/or $1,081,400 in secured debts.
While these are the basics of eligibility, other requirements do exist. Contact a bankruptcy attorney to determine your eligibility.
Will bankruptcy protect me from harassing creditors?
By law, a person who has filed for bankruptcy receives a “stay” from creditors. In short, creditors generally are not allowed to pursue payment during a pending bankruptcy filing. If the bankruptcy is accepted and a debt discharged, that creditor cannot continue to contact you for payment. If you continue to receive demands for payment, contact your attorney.
Will bankruptcy hurt my credit?
Sadly, most people with problem debt have already seen a negative impact on their credit. Though a bankruptcy remains on your credit report for 7-10 years, you also have a fresh opportunity from that point on to begin rebuilding your credit. Failure to address debt problems, however, can result in ongoing damage to your credit that extends well beyond the length of a bankruptcy.
How do I file for bankruptcy?
Typically, personal bankruptcies may be filed in the bankruptcy court of your local district, and must adhere to federal and local bankruptcy codes. Though individuals may represent themselves, the complexity of bankruptcy laws often leads to costly errors. As a result, the use of a Waco Bankruptcy attorney is advised in order to ensure the success of your application, to negotiate debt, and to protect the filer from asset seizures and harassment.
About the Author: Jeff Davis is a highly experienced Waco bankruptcy lawyer and owner of Davis Law Firm. To find out more information a please visit the dedicated bankruptcy website at http://bankruptcy.jeffdavislawfirm.com/.