Which way are your finances leading you? Do you direct your financial picture or are your debts telling you how to spend your money? Debt has a funny way of piling up so high that sometimes you're forced to stop and ask how the situation got so out of control. While sometimes you can point the finger at yourself, other times the guilty source is out of your control. At this point, filing bankruptcy seems a lot better solution than remaining at the bottom of the pit.
Every state has its own interpretation about bankruptcy and filing chapters. Some states allow you to hold onto your assets while other states grab hold of everything you own and require you to turn over ownership. Nearly every state requires that bankruptcy is stated on your credit history for at least 7 years. Most mortgage companies prefer that you have a clear record for at least 3 years beyond the bankruptcy claim before they will consider you viable for a loan.
Bankruptcy laws are very complex and come in various forms that follow laws written in bankruptcy chapters. The most common chapter is Chapter 7, which cancels or discharges all financial debts. Still, larger debts like a home loan must be paid off with collateral if possible or given back. Chapter 13, however, states that you are to consolidate your debts into one payment made to the court for 3 to 5 years. Many people who file Chapter 13 end up keeping their belongings. The trick to qualifying for Chapter 13 is you must prove that your monthly living expenses do not exceed your monthly income. Other common bankruptcy chapters are Chapter 11 and 12, which are used for corporations and businesses that are restructuring or calling it quits.
Many people assume filing a Chapter is a simple and convenient way to get rid of burdensome expenses. So, why don't more people file bankruptcy? Quite simply, your credit is ruined. For a long time after the bankruptcy verdict, your bad credit follows you around like a dark cloud. Every time you file for a loan, your credit report thunders, "Beware!" and banks won't look twice at you. Even when a creditor eventually offers you a loan, you can expect to pay the highest insurance rates, premiums and interest rates. In many situations, you'll have to take out a second loan just to cover the down payment on the initial loan.
While some people might not find that such a bad deal, these situations often spiral you farther into trouble. Rather than risking these bad offers, you should hold off a few years for your credit history to improve and then approach a better creditor. While some lenders offer to consolidate your debts and allow you to pay off in one lump sum, you should carefully go over those offers. Many reports by the Federal Trade Commission (FTC) about fraudulent debt-counseling firms are available for you to review online before you consider one of these counseling firms over filing Chapter 13. Visit American Bankruptcy Institute online at http://www.abiworld.org for the latest reports and reliable information about bankruptcy.
Copyright 2005 Philippa Munster. All rights reserved. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Philippa Munster is the webmaster and operator of Bay Bankruptcy Inc which is a useful source for information on bankruptcy on the internet. For further details visit her archive of articles here: http://www.baybankruptcy.com/ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ |
