While bankruptcy may be a life vest for most people drowning in debt, choosing\u00a0to file is never an easy decision. For some financially distressed debtors,\u00a0bankruptcy may not always be the best option.<\/p>\n
Several events can cause individuals to lose control of their financial situation.\u00a0Divorce, job loss, lawsuits, foreclosures or credit card debt can drive a person\u00a0over the financial edge. Generally, filing bankruptcy allows people who are\u00a0having financial difficulties to wipe out their debts. In most cases, people filing\u00a0bankruptcy can keep all of their property. Thus, bankruptcy helps people wipe\u00a0out their debts, keep their property and get a fresh start.<\/p>\n
Many people filing for bankruptcy have accumulated a huge credit card debt and\u00a0in some cases are trying to prevent a foreclosure on their home.<\/p>\n
Ten Years of Bad Credit<\/p>\n
Although bankruptcy can wipe out all unsecured debts through an order of the\u00a0court called a discharge, bankruptcy information remains on a credit report for\u00a010 years. Any negative information that appears on a credit report may prevent\u00a0an individual from buying a home or car, or from obtaining a credit card or loan.<\/p>\n
Bankruptcy serves two main purposes:<\/p>\n
1. It gives creditors a fair share of the money that the debtors can afford to\u00a0pay back.<\/p>\n
2. It gives debtors a fresh start.<\/p>\n
There are two ways in which bankruptcy can provide for payments to creditors\u00a0and a discharge for debtors \u2013 Chapter 7 and Chapter 13.<\/p>\n
Chapter 7<\/p>\n
In a Chapter 7 bankruptcy, known as the liquidation chapter, debtors give up\u00a0certain property when they file for bankruptcy. A trustee appointed by the court\u00a0sells the property and uses the proceeds to pay the creditors. A trustee is usually\u00a0a lawyer or accountant who specializes in bankruptcy cases. The debtor receives\u00a0a discharge shortly after the case is filed.Debtors are allowed to keep any money earned after filing for bankruptcy, as\u00a0well as most other property obtained after the filing. Under this chapter, all\u00a0unsecured debts are wiped out. These debts include credit card bills, medical and\u00a0legal fees, utility bills, deficiency balances (the difference between the amount\u00a0owed and the value of the property), loans from friends and some student loans.<\/p>\n
There are some debts that cannot be discharged through the bankruptcy\u00a0process. These debts, known as non-dischargeable debts, include alimony, child\u00a0support, some student loans, certain federal, state and local taxes, debts from\u00a0fraud, larceny, theft, and fines and penalties for items worth over $1,000.<\/p>\n
Chapter 13<\/p>\n
Chapter 13 is designed for individuals with regular income who want to pay their\u00a0debts but are currently unable to do so. The purpose of this chapter is to help\u00a0individuals, under court supervision and protection, to propose and carry out a\u00a0repayment plan under which creditors are paid over an extended period of time.\u00a0Under this chapter, debtors are permitted to repay creditors in full or in part, in\u00a0installments over a three-year period.<\/p>\n
Try the following measures before declaring bankruptcy:<\/p>\n
\u2022 Control spending, either with the help of a credit counselor or a debt\u00a0consolidation plan.<\/p>\n
\u2022 Set up repayment plans with creditors.<\/p>\n
\u2022 Get credit counseling and learn about financial management.<\/p>\n
Most experts advise against filing for bankruptcy and recommend finding\u00a0alternative ways to pay off debt. Most consumers should try paying off their\u00a0debts through a repayment plan before choosing bankruptcy. These types of\u00a0programs will teach the consumer ways to reduce expenses and save money.<\/p>\n
DMCC is a 501 (c)3 nonprofit organization committed to educating consumers on financial issues and providing personal assistance to consumers who have become overextended with debt.\u00a0 Education is provided free of charge to consumers, as well as personal counseling to identify the best options for the repayment of their debt. To speak to a certified credit counselor, call toll-free 866-618-3328 or email\u00a0<\/em>contact@dmcconline.org<\/em><\/a>.DMCC is located at 1330 SE 4th Ave, Suite F, Fort Lauderdale, FL 33316.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":" While bankruptcy may be a life vest for most people drowning in debt, choosing\u00a0to file is never an easy decision. For some financially distressed debtors,\u00a0bankruptcy may not always be the best option.<\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[14],"tags":[],"class_list":["post-179","post","type-post","status-publish","format-standard","hentry","category-bankruptcy"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p5shu1-2T","_links":{"self":[{"href":"https:\/\/www.dmcccorp.org\/edu\/wp-json\/wp\/v2\/posts\/179","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.dmcccorp.org\/edu\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.dmcccorp.org\/edu\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.dmcccorp.org\/edu\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/www.dmcccorp.org\/edu\/wp-json\/wp\/v2\/comments?post=179"}],"version-history":[{"count":7,"href":"https:\/\/www.dmcccorp.org\/edu\/wp-json\/wp\/v2\/posts\/179\/revisions"}],"predecessor-version":[{"id":1985,"href":"https:\/\/www.dmcccorp.org\/edu\/wp-json\/wp\/v2\/posts\/179\/revisions\/1985"}],"wp:attachment":[{"href":"https:\/\/www.dmcccorp.org\/edu\/wp-json\/wp\/v2\/media?parent=179"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.dmcccorp.org\/edu\/wp-json\/wp\/v2\/categories?post=179"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.dmcccorp.org\/edu\/wp-json\/wp\/v2\/tags?post=179"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}