Financial Difficulties and Personal Bankruptcy

Financial troubles are not a fun thing to think about or even an easy thing for many to come to grips with. However, acknowledging the situation is really the first step when it comes to determining whether or not to declare personal bankruptcy. Personal bankruptcy really differs from case to case and person to person. As the term suggests personal bankruptcy is based on an individual or personal level as every individual’s personal financial situation is different and unique. This can be explained according to an individual’s own financial circumstances where financial difficulty is managed or resolved by filing personal bankruptcy. There are many variables that make up and affect personal bankruptcy. Some of these variables include employment status, income, medical bills, credit card debt, mortgage payments, etc. Whether these factors are beyond one’s control such as a job loss or the result of careless overspending that led to overwhelming debt, they can all affect one’s finances resulting in a bankruptcy filing. The bottom line is, once these factors have all been examined, the individual can then get a better grasp on their financial situation and determine the best course of action to take from there.Actually the first step in filing bankruptcy is to find a reputable bankruptcy attorney and discuss your options. Most bankruptcy attorneys offer free consultations which can assist the individual and educate them on the bankruptcy process. Learning about the different chapters of bankruptcy that can be filed, which chapter is best for them, and if they even qualify to file bankruptcy is essential. There are basically two chapters of personal bankruptcy one can file, Chapter 7 and Chapter 13 Bankruptcy. They are both very different and both have their own benefits depending on the individual’s financial situation. To begin with, Chapter 7 Bankruptcy involves eliminating unsecured debts such as credit card debt, and any non-exempt assets are sold by the bankruptcy trustee so the proceeds can be distributed to the creditors. In most cases however, debtors rarely lose any property in the bankruptcy due to generous bankruptcy exemption laws that their bankruptcy attorney will use in their benefit. So basically in a fairly short time, about three to six months, the debtor will be debt free or close to it. This is a very popular chapter of personal bankruptcy to file since debt elimination is what most people are looking for, but there are certain criteria that must be met for the individual to qualify to file Chapter 7, such as income level restrictions and type of debt the individual has. Plus since the changes to the bankruptcy code back in 2005 it has become more difficult to apply for. That is why it is always best to have representation from an experienced bankruptcy attorney to assist individuals and assure that their bankruptcy is a smooth process. Chapter 13 Bankruptcy on the other hand involves a reorganization of one’s debt. This means that the debtor and their attorney will come up with a repayment plan that will last for three to five years. Many people find that their financial responsibilities are easier to handle using a court approved payment plan. The debtor is protected under the law and cannot be harassed by creditors since the automatic stay that prohibits creditors from all contact with the debtor is in place during the entire Chapter 13 process. Secured debts are paid by priority first, then unsecured debts are paid after with the remaining timeframe of the payment plan. Any remaining unsecured debt left over at the end of the timeframe is discharged. Whichever chapter of personal bankruptcy one decides to file, the end result will be that the individual will be on the road to financial freedom.