There are two types of bankruptcy typically filed by
individuals. Chapter 7 is the most common, where most of your debts are wiped
out. Chapter 13 allows you to pay back your debts on a payment plan, and may
also reduce some of your debts such as medical bills. A bankruptcy can stay on
your credit file for up to ten years and should be considered only as a last
resort.
Credit counseling is often a first step, but once you realize
you can’t keep up with the payments, you should take action quickly.
Ignoring the problem will only make it worse as creditors pile on late fees.
Once you file, all of your creditors will be notified and a court issue will
stop wage garnishing, creditor harassment, and foreclosures. This is often the
first time you can breathe a sigh of relief as the phone stops ringing and you
can get back on track with your life and your credit.
File your own chapter 7 bankruptcy
A
Chapter 7 filing will discharge your debts, except for alimony and child
support, federally insured student loans, criminal and traffic fines, state and
federal taxes due within the last three years, and debts that resulted from
willful malicious acts.
File your own chapter 13 bankruptcy
A
Chapter 13 bankruptcy puts you on a mandatory repayment plan where your income
is taken into account. You are usually given longer to pay off your debts and
may have some of the debts reduced such as medical bills and past utility
bills. It is very difficult for anyone to file bankruptcy, and is usually not
taken lightly, despite what your creditors say.
Once you file for bankruptcy you should work with your attorney
and a financial advisor to learn what happened, and how you can avoid taking on
debt in the future. Bankruptcy can be a clean start to a bright future.