When Bankruptcy is Your Only Option
When you’ve reached the end of your financial rope, sometimes the only option that you have left to use bankruptcy. There are many intermediate steps that should be attempted before filing for bankruptcy, but if your financial situation is bad enough those steps may not be sufficient. Whether you have gotten into the situation because of circumstances out of control such as the death of a spouse, prolonged sickness, loss of job, or if you’ve gotten into this situation because of a lack of discipline and good financial habits, the bankruptcy courts are going to want to know that you have attempted to repay your creditors before filing for bankruptcy. Some of the steps that you may take including getting a second job, selling assets and using the proceeds to repay your creditors, or even debt consolidation loans. While each of these steps can be a lengthy article in and of themselves, in this article we’re going to briefly discuss personal bankruptcy. If there are no funds available to pay, then declaration as the bankrupt is the only option not necessary. The bankruptcy attorney san diego can provide the alternatives to the clients.
When going through a personal bankruptcy, it can feel like the world is set against you and that you cannot catch a break. You may feel like you have failed, that your creditors are out to get you, or that the nightmare that you are in will never end. The truth of the matter is that bankruptcy is a temporary situation and that once the process is completed you can regain a certain degree of freedom and financial security. While bankruptcy will negatively impact your credit score and your ability to obtain loans in the future, that setback may be a small price to pay to stop collection calls and to regain peace of mind.
For individuals, there are two primary types of bankruptcy. Chapter 13 bankruptcy is for individuals who have some debt but who also have a substantive income as determined by the court. With this type of bankruptcy, the court will often decree that the individual must develop a plan to pay back their creditors over a 3 to 5 year time frame. Creditors cannot harass an individual during this time frame in an attempt to recover funds. The creditors will also often have to settle for receiving less money than they are owed. While this is a plus for the individual, and even greater benefit is that individual typically gets to keep their property.
The second type of bankruptcy that is generally available to individuals is Chapter 7. Chapter 7 is a more complicated form of bankruptcy and is often used to prevent bank foreclosures. Certain personal properties may be retained by the individual, however substantive assets that have value to creditors such as homes or jewelry may be sold off to repay the debt. Exceptions of this are often primary residencies, retirement plans, vehicles, and personal jewelry such as wedding rings. Second homes, cars with significant values such as sports cars, and extravagant jewelry are generally not protected in this type of bankruptcy. Also this form of bankruptcy will remain on your credit record for at least 10 years and will impact your ability to get a loan.
The thinking that allows a person who petitions for bankruptcy to retain certain possessions is that it does not benefit society to strip the person of a minimal level of assets that would allow them to contribute to their community. For example, retirement plans are often not touched in a bankruptcy because doing so may render a person poverty-stricken upon retirement and force them to rely on the state for sustenance. A modest vehicle is often granted so that a person can continue to work and earn money to support themselves. It is in the best interest of society that the person filing for bankruptcy get on their feet as quickly as possible, resolve their debt problems, and get back to leading a normal life.
Deciding whether to file for Chapter 7 or Chapter 13 bankruptcy is a process that is difficult to go through but begins by determining the resale value of what you own. If the property that you have has substantial value or you have substantial assets, chapter 13 bankruptcy may be the way to go. If you don’t have any assets or income, chapter 7 may be the only hope that you have to stop creditors from bothering you day and night. Regardless of which way you go though, it is advised that you find a good lawyer to help guide you through the process.