Wednesday, September 24, 2014, AM | 9 Comments
Filing for bankruptcy can be scary. You have fallen behind in your debt payments and feel like a failure, but that is water under the bridge now. If you cannot keep up, then bankruptcy might be the best option. Here is a helpful bankruptcy guide to surviving financial distress.
Bankruptcy Helps Discharge Debt
Before bankruptcy, debtors in England were tossed in debtor’s prison. In 1542, the Statute of Bankrupts was written to create an organized process for debtors to discharge their burdens. Bankruptcy is supposed to be a positive way for debtors to re-balance their debt portfolio.
What is your Plan – Chapter 7 or Chapter 13?
Once you fall behind in your debt payment and decide that bankruptcy is your best path, then you must decide between Chapter 7 or Chapter 13.
Chapter 7 is generally referred to as “Debt Relief” meaning that much of your debt will be written off as unrecoverable. Figuring out which bankruptcy plan will work best for you is often the most difficult part. You may need the help from a professional like those at Abakhan &Associates Inc. to help you determine which bankruptcy plan is best for you.
Chapter 13 is “Debt Restructuring” and requires you to set up a plan to repay your debts. This restructuring might involve a longer time frame, but will not damage your credit rating as severely. Make sure you develop a sensible plan to get out of debt, then follow that plan. What do you want to achieve with bankruptcy?
Latest American Bankruptcy Laws
In order to succeed with bankruptcy, you must understand how bankers think. Their goal is to keep you in debt in perpetuity. But your goal must be to balance your credits and debits.
Before 2005, bankruptcy laws were very liberal to facilitate the free flow of capital to a burgeoning economy. In 2006, as debtors started to struggle, the bankruptcy laws were made more stringent. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was passed to discourage bankruptcy filings. There were people who would intentionally run up their debt and then file bankruptcy one, two or three times before the law was changed.
After 2006, bankruptcy became even more difficult. Filers can only file a certain number of times during a designated time frame. Bankruptcy can help remove debt, so people can regain their life. But, bankruptcy laws cannot be abused.
Follow your Plan
You will need a cogent, coherent and sensible plan to get out of bankruptcy. You can survive this financial distress, just make sure you identify the primary goals you want to achieve by filing for bankruptcy.