How To Claim Bankruptcy - Consider This
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These days many people are becoming interested in finding out how to claim bankruptcy, which is a situation that arises when individuals can no longer service or repay their debts.
It is not always the individual themself who files for bankruptcy. In some situations a creditor can file what is called a bankruptcy order against the individual who owes money. This will proceed whether the individual likes it or not.
When claiming bankruptcy it is now a legal requirement that consumer credit counselling is undertaken, to ensure that the individual is entering this state of affairs only as a last resort.
So what are the pros and cons of Bankruptcy?
The most popular chapter to file bankruptcy under is chapter 7, where an individual has all debt taken away. Not all debt can be written off however, and if the main contributor to the bankruptcy is debt that has to be repaid, a chapter 13 bankruptcy is the more appropriate chapter.
Coming out of chapter 7 has 2 main disadvantages.
The first and most difficult is the fact that virtually all your worldly goods are sold and the money disbursed amongst your creditors, leaving you with very little.
The second is that although any remaining debt is cancelled, those who you have not repaid in full will likely as not, be very reluctant to engage in any financial activity with you in the future.
This may not necessarily be the case though, as the above refers to the chapter 7 bankruptcy laws.
Anyone filing for bankruptcy now has to complete a financial means test.
There is also an examination of your income over the past 6 months, and if it is found to be above the median income for a family of the same size as yours in the same state, and you fail the means test, you are in elligible for chapter 7 bankruptcy. In this case one would normally file chapter 13 bankruptcy.
The advantages of the chapter 13 bankruptcy rules are that you do not have to sell any of your personal assets, and that your creditors are paid in full by way of a repayment plan, over 3 - 5 years.
The main disadvantage of Chapter 13 bankruptcy rules is that the repayment schedule can be pretty harsh. The means test is complex and government has it's own definitions for "allowable expenses", "disposable income" etc, which can often serve to make your income appear higher than it is, and making a repayment plan quite difficult.
A chapter 7 bankruptcy stays on one's credit record for 10 years, chapter 13, 7 years.
Article Source: Articlelogy.com
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