Have you done all you can to settle your debts, but do not have enough income to cover all the debts? Maybe you lost your job, like 90% of the most other individuals who file for bankruptcy. The creditors keep coming at you for collection. They call day and night. One has even begun court proceedings to attempt to collect the debt. What other option do you have but bankruptcy?
When deciding on bankruptcy, you need to determine if you will use a Chapter 7 or Chapter 11 Bankruptcy. Both bankruptcies have similarities as follows:
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* Prior to filing. You will need to find a bankruptcy attorney, attend credit counseling and provide an exhaustive, written detail of all existing debts that qualify for inclusion.
* After filing. An automatic stay prohibits the majority of your creditors from pursuing further collection. You will be responsible for debt you accrue after filing for bankruptcy. Before your bankruptcy can be finalized, you are required to participate in a debt management program. Bankruptcy may stay on your credit for up to 10 years. Oftentimes, all unsecured debt is discharged through either bankruptcy process. Secured debt is not discharged.
There are distinct differences between the Chapter 7 and Chapter 11 Bankruptcy. You'll want to be educated on both prior to making a choice. Below are the differences to consider:
* Chapter 7 Bankruptcy. Before you are allowed to file, you are scrutinized for a means test. Your income cannot meet or exceed the median income for your state. You may lose some property in the bankruptcy; however, most filers do not. You may keep your primary residence, as long as you continue to make timely payments on the mortgage. The entire process usually takes 3 to 6 months to initiate and finalize. The only remaining debts are debts you accrued during the bankruptcy, unpaid child support payments, car payments, mortgage payments, student loans and maybe some medical bills. Credit reporting bureaus note a Chapter 7 Bankruptcy on your credit report for 10 years.
* Chapter 11 Bankruptcy. This is the bankruptcy you'll want to use to save your home from foreclosure. If your lender has initiated foreclosure proceedings against you, you need to act quickly. You will want to get this bankruptcy filed in the court prior to the scheduled sheriff's sale date on the courthouse steps. If you file after the sheriff's sale, you will lose ownership of your home. Some states have a provision to this that allows a redemption period. Most homeowners, however, are never able to redeem the property. This bankruptcy allows you to pay creditors and past due mortgage payments over time, typically over a period of 3 to 5 years. You will still be required to pay your current payments on time throughout the bankruptcy proceedings and beyond. Some of the disadvantages to this bankruptcy are that it will take you longer to repair your credit; and you have to pay additional maintenance fees to the court. Another glaring disadvantage is that many who choose this route often fail to follow through with the process, so they lose their home, anyway. Keep in mind that you cannot file for bankruptcy again until 6 months following the date your bankruptcy was dismissed. Credit bureaus sometimes remove a Chapter 11 Bankruptcy from your credit report as soon as 7 years after the discharge date.
Probably the tie breaker in making a decision as to which bankruptcy you will choose is whether you own a home, and whether it is in foreclosure. If your home is in foreclosure and you want to save it, then Chapter 11 Bankruptcy is for you. That is a decision, however, that only you can make. For more information on bankruptcies, check out the Federal Trade Commission (FTC) website. They have a wealth of information that may assist you in making your decision.
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