It is important to know the reasons causing Bankruptcy and the things essential to know before filing bankruptcy. Why it happens? Or what compels a borrower to declare that he or she is bankrupt? It is important to assess the factors that make you take that step to shed off the burden of overflowing debt.
The first and foremost is unemployment that stops the income that is used to pay back loans, large medical expenses that stops you from concentrating on the debts to pay off, divorce, death of the sole breadwinner in the family or other immediate causes or family disputes that creates a barrier for the borrower to clear debts. A recent study reported that more of US bankruptcies were caused by large medical Bills. It was estimated that illness and medical bills caused half (50.4 percent) of the 1,458,000 personal bankruptcies in 2001.
You know that Filing bankruptcy will put the entire foreclosure process but filing bankruptcy without an after thought can prove a fatal decision made it is therefore important to look into the chapters in Bankruptcy that you can file. Chapter 7 and 13 can help provide relief from the nerve raking debts and must be aware of them.
Chapter 7 bankruptcy that is “liquidation,” can provide relief as it mitigates the legal liability to pay debts. The non-exempt property is then handed over to the bankruptcy trustee to sell it off to pay off the debts. The debtor receives a discharge within four months. Chapter 7 therefore helps a debtor to begin afresh. A debtor can therefore keep the exempt property but at the same time gets to shed off the overflowing debt.
Chapter 13 bankruptcy that is reorganization” provides the flexibility to pay debts according to affordable monthly payment plan approved by the court. Chapter13 bankruptcy is filed by individuals who want to pay off their debts over a period of three to five years. For this the debtor needs to have income that is saved after the daily livelihood expenses are taken care of.
Why choose Chapter 13 and not Chapter 7 Bankruptcy?
The next thing that should also be noted is to assess on what to choose. Chapter 13 bankruptcy is more applicable only when you are sincere to your efforts to pay back but with assistance from bankruptcy court. You can make modifications in your mortgage or car loan. Opt for chapter 13 bankruptcy when you do not qualify for chapter 12 family farming bankruptcy, you have already filed chapter 7 and cant wait for another eight years to lapse so why not go for Chapter 13 instead. When in cases where you own a lot of non-exempt property and do not want to give off all of them under chapter 7 bankruptcy norms you can go for chapter 13 that saves even the co-debtor if any.
Taking heed of the essentials before filing bankruptcy therefore becomes a paramount necessity for those going for bankruptcy. The debtor is discharged 3 – 5 months after bankruptcy is filed, mitigating the possibility of foreclosures.