The Basics of Personal Bankruptcy Laws

The Basics of Personal Bankruptcy Laws
Personal bankruptcy laws in the United States are designed to help any resident of the country who is burdened with debt and has inadequate or no means of paying off. Through personal bankruptcy laws, a person’s overwhelming debt can be discharged or wiped out to give the person a chance to re-establish himself.
While personal bankruptcy laws provide a person struggling with debt a chance to start anew, anyone considering filing should realize that declaring bankruptcy will ruin one’s credit standing. The record of bankruptcy filing will be on the person’s credit report for the next 7 to 10 years. Usually, after bankruptcy a person faces more difficulty and less favorable terms in getting credit.
Before deciding for bankruptcy, speak with a financial counselor and be sure to look for other ways that can fix your credit problems. If you have exhausted all possible alternatives, then personal bankruptcy laws may grant you relief from most of your debt.
The two most commonly used provisions under the United States personal bankruptcy laws, are Chapter 7 bankruptcy and Chapter 13 bankruptcy.
When you file a Chapter 7 bankruptcy, you will surrender all your assets to the court-appointed trustee who will oversee its liquidation. The cash generated from your liquidated assets will be used to pay the people you owe. Only your assets that are considered non-exempt will be seized. Usually, it takes four to six months for the bankruptcy court to issue the discharge. Majority of your secured debts may be discharged but some exceptions include child support and student loans.
Chapter 13 bankruptcy can be used by individuals who have a source of income but need more time to make their payments. In this type of bankruptcy, the debt payment plan including the amount to be paid is restructured so that the debtor will only have to pay back what he can afford after all necessary expenses are covered. The debtor is given a fixed period of time which can be from 36 to 60 months to pay as much of his debt as possible, after which the debtor is relieved from all dischargeable debt.
The cost of bankruptcy filing fee is different for each bankruptcy chapter. You can check the US Court’s website for the list of current fees, which should be around $200-300.
While it is not required to have a lawyer in order to file for bankruptcy, it is highly recommended that you seek legal help. Bankruptcy is a legal process that can be overwhelming and complicated. It will be good to have someone to guide you throughout the process and give you expert legal advice.