Personal Bankruptcy - Online Advice & Information USA
A Quick Online Guide to Personal Bankruptcy
Personal bankruptcy can happen to anyone. It doesn't take much; a few too many charges on the credit card, a medical emergency, a sudden job lay-off, and you can land in the red. Even Great Expectations author Charles Dickens was once imprisoned for his debts. And with more and more Americans living paycheck to paycheck everyday, such a situation becomes all too possible.
The number of Americans filing for personal bankruptcy in 2009 rose by a third, and by the end of June, 2010 these cases rose by another 21 percent. According to the Federal Judiciary, that makes 1,512,989 people that declared bankruptcy only mid-way through year! When considering bankruptcy, ignore the news stories about the mega corporations that bury themselves under mountains of corruption, debt and fraud. Personal bankruptcy works very differently from corporate bankruptcy, allowing individuals more flexibility and choice.
There are two types of personal bankruptcy - the well-known liquidation procedure known as Chapter 7, and the repayment scheme of Chapter 13. Both types are designed to help both the debtor and creditor keep as much money as possible; the difference is in how they go about obtaining it. In 2005 bankruptcy laws were revised in order to encourage more Chapter 13 filings in an attempt to have more debts paid off rather than liquidated.
Declaring Chapter 7 might be the answer if you:
- Need to quickly stop creditors from taking collective action against you. This includes canceling your utilities, evicting you from your home, or repossessing your car.
- Want to clear debt quickly, sometimes within four months.
- Don't mind losing assets to your creditors
- Don't have any monthly disposable income.
- Realize you cannot dismiss the case once it has begun, and you cannot change to a Chapter 13.
Chapter 13 might suit you better if you:
- Prefer to pay off your debt slowly, over three to five years.
- Have a regular income that allows you to set aside monthly debt payments to court.
- Can stick to a strict budgeting scheme that forces you to put all your disposable income towards your debt.
- Believe you might be able to pay off your debt, but still want the option to change to a Chapter 7 if things do not work out.
A third option is to file 'Chapter 20 bankruptcy,' which is when debtors file Chapter 7 and Chapter 13 in order to take advantage of the systems for different types of debt.