Bankruptcy is a very harsh word to say. Bankruptcy can be defined as the legal process thorough which individuals or businesses who can find themselves with more debts than they can pay as they become due are able to wipe out their debts and pay them out under the protection of the bankruptcy court. Overspending is a main reason for many debtors suddenly putting themselves in financial trouble. But filing for bankruptcy cannot be the answer to all your financial difficuties. In fact, bankruptcy cannot discharge all your debts.
The two kinds of bankruptcy proceeding that you can file for are Chapter 7 and Chapter 13. Chapter 7 called liquidation is the most common type of bankruptcy proceeding that involves the appointment of a trustee who collects the non-exempt property of the debtor, sells it and distributes the proceeds to the creditors. The basic concept in a chapter 7 bankruptcy is to wipe out your debts in exchange for your giving up property, excluding exempt property which the bankruptcy law allows you to keep. If you want to keep property such as a home or a car and are behind on the payments on a mortgage or car loan, a chapter 7 filing probably won't be the smart choice for you. The reason is mortgage holders or car loan creditors can take your property to cover your debt.
Chapter 13 called reorganization allows you repay your debts over three to five years. In order to file for Chapter 13, you must have a reliable source of income that you can use to pay off creditors, and propose a repayment plan that explains how you are going to pay back your debts over the next three to five years. Also, under chapter 13 you can have an option to catch up delayed payments to avoid repossession or foreclosure if you have secured loans.
A good experienced bankruptcy lawyer can lead a debtor through the complicated legal, financial, and emotional chaos of bankruptcy proceeding. Confronting the emotional and psychological issues encompassing bankruptcy and acceptance of the situation are also crucial to rebuilding and keeping a successful financial life.
About the author: Linda A owns and operates http://www.bankruptcy0.info Bankruptcy
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