Where an individual or legal entity can no longer afford to service or repay their debts, a state of bankruptcy exists. In light of the recent economic downturn many people are looking to find out how to claim bankruptcy. Here are a few of the advantages and disadvantages of filing.
It is not always the individual themself who files for bankruptcy. In some situations a creditor can file what is called a bankruptcy order against the individual who owes money. This will proceed whether the individual likes it or not.
The process itself is fairly straightforward, but bankruptcy should only be entered into as a very last resort, as it’s effects are far reaching and life changing.
What are the advantages and disadvantages of bankruptcy?
The most popular chapter to file bankruptcy under is chapter 7, where an individual has all debt taken away. Not all debt can be written off however, and if the main contributor to the bankruptcy is debt that has to be repaid, a chapter 13 bankruptcy is the more appropriate chapter.
There are a couple of disadvantages with this however.
The main disadvantage is that the majority of your possessions are liquidated to pay your creditors.
Also, those with whom you have dealt with financially in the past will be unlikely to want to deal with you again. For example, a bank account will be difficult to obtain.
All the above relates to chapter 7 bankruptcy laws.
Anyone filing for bankruptcy now has to complete a financial means test.
There is also an examination of your income over the past 6 months, and if it is found to be above the median income for a family of the same size as yours in the same state, and you fail the means test, you are in elligible for chapter 7 bankruptcy. In this case one would normally file chapter 13 bankruptcy.
Chapter 13 bankruptcy rules make an individual repay all debt according to an agreed repayment plan over 3-5 years. No assets are sold.
The means test used to define an individuals allowances and income is complex and quite harsh. The means test can also make your income look better than it is, resulting in a repayment plan that leaves an individual with very little disposable income.
As far as an individual’s credit score is concerned, chapter 13 stays on record for 7 years and chapter 7 for 10 years.
Should you require more free inShould you requiremation on how to claim bankruptcy and the various chapters and how they work, go to www.howtoclaimbankruptcy.net Grab a totally unique version of this article from the Uber Article Directory