3 Frequently Asked Questions About Bankruptcy

Written by on June 9, 2013 in Money - 1 Comment | Print this page

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bankruptcyThere are many reasons why someone might have to file for bankruptcy.

Perhaps you have overwhelming medical bills, or maybe you have a big mortgage and lost your job.

No matter what the reason, know that countless Americans file each year, and taking this difficult step doesn’t mean that your life – or your finances – are ruined forever.

Here are three frequently asked questions about this topic that may be able to shed some light on it and quell your fears a bit.

1) Will Creditors Continue to Bother Me?

One of the best things about taking this action is that your creditors will not be able to harass you anymore. Once you team up with a lawyer, one of the first things that he or she will do is to notify your debt holders that legal proceedings are underway to remedy the situation.

After they receive this notification, it is considered unlawful for them to continue to contact you. This is because they should only be dealing directly with your attorney from that moment forward.

Although many people try to avoid hiring a lawyer (especially when they are already in debt), this is a case in which it really pays off to do so, because he or she will get to work immediately notifying the parties involved.

This can bring you a little peace of mind (and maybe a good night’s sleep, too) right away.

2) What is Chapter 11?

There are a few different kinds of bankruptcy that are common. Chapter 11 is typically reserved for large businesses or corporations, so individuals don’t really need to be concerned with it unless they are owners of a sizeable organization that is going under.

3) Should I Choose Chapter 7 or 13?

Most people deal with either Chapter 7 or Chapter 13 bankruptcy. With Chapter 7, all unsecured debts are typically discharged, which means that the person doesn’t have to pay them.

However, in this case, it is possible that your work wages could be garnished, your car repossessed or even your home could be foreclosed upon.

What’s more, while some debts (such as a mortgage or credit card) may be forgiven, some things such as student loans or child support payments will probably still have to be paid. It’s easy to see why this isn’t a popular option.

In states such as Michigan, Chapter 13 bankruptcy is a better option because it cuts the amount of money you owe down, essentially reorganizing your payments.

If you have at least a little bit of money left over each month after paying for your basic necessities (like food and housing), Chapter 13 will allow you to settle your debts over a period of a few years.

Typically, you will be able to keep your home and vehicle under this plan, although it is best to check with your lawyer because he/she will be abreast of any pertinent laws in your state.

Filing for bankruptcy can often be the first step toward getting your credit and financial life repaired.

When Carla and her husband were laid off within months of one another, their family found itself in dire financial straits. Through resources like acclaimlegalservices.com, they learned about filing for bankruptcy, and have been able to begin rebuilding from there. Carla, now a writer, is glad to share her knowledge with others.

Image courtesy of Nutdanai Apikhomboonwaroot / FreeDigitalPhotos.net

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