Modern Day Bankruptcy: It’s not what you think

Bankruptcy… not a word you like to think about… but, maybe you should. Because bankruptcy can help you get you back on your feet after a financial crisis.

Contrary to popular belief, bankruptcy can help you:

• Recover from financial disaster;

• Reestablish credit;

• Keep your 401K, rather than using it to pay bills; and

• Avoid foreclosure on your home.

Bankruptcy does not come in one size that fits all, so to speak. And the different bankruptcy chapters serve specific, individual needs.

So which type of bankruptcy best applies to your financial situation?

Chapter 7 Bankruptcy

Chapter 7 allows you to discharge most of your debt and generally keep your house, car and up to $25,000.00 in personal property (if joint $50,000).

Who qualifies?

· Individuals, partnerships, corporations or other business entities, regardless of the amount they owe and whether or not they are solvent or insolvent.

Who should file?

· Those who don’t have the means, such as a steady income, to pay their unsecured debt.

· Those who have lost their jobs temporarily or permanently.

Who should NOT file?

· Business owners, including those involved in corporations, partnerships or sole proprietorships, who would like to stay in business and avoid liquidation. They will fair better filing for Chapter 11 Bankruptcy.

· Debtors whose ‘current monthly income’ exceeds the state’s median income, unless they are willing to apply for a ‘means test’ to determine whether the chapter 7 filing is considered ‘abusive.’

Chapter 13 Bankruptcy

Chapter 13 gives debtors the option to create a plan to catch up on past due payments and save their homes from foreclosure. Once their payment plan is approved in court, debtors who’ve filed for chapter 13 make regular debt payments through a court appointed trustee or regular payroll deduction.

Who qualifies?

Individuals with regular income may file for chapter 13, also known as the ‘wage earner’s plan.’ Sole proprietorship businesses also may file for chapter 13.

Who should file?

Anyone considering bankruptcy should file for chapter 13 if possible because it offers a number of advantages, that include:

· Avoidance of foreclosure;

· Rescheduling of secured debts to lower monthly payments;

· Protection of co-signers on consumer debts; and

· Loan consolidation.

Who should NOT file?

A corporation or business partnership may not file for chapter 13.

Explore Your Options

Bankruptcy doesn’t have to crush your dreams of financial security. In fact, for some, it makes a prosperous future possible. Still, before filing, explore your options and make certain bankruptcy is right for you. Some debt counseling services can provide you with a manageable repayment plan so you can avoid the hassle of filing for bankruptcy.