Personal Bankruptcy FAQ
Bankruptcy protection laws were enacted to allow individuals and companies to get a fresh start after financial difficulties. There are four different types: Chapter 7, also known as "liquidation," Chapter 11, or "reorganization" bankruptcy, Chapter 13 and Chapter 12.
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Benefits
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Some types of bankruptcy protection, such as Chapter 13, will allow you to save your home from foreclosure. Most types, such as Chapter 11 protection will give you an opportunity to create a repayment plan to fully repay all of your debt.
Eligibility
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In most instances, the only requirement to file for bankruptcy protection is an inability to pay back your bills.
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Misconceptions
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Contrary to popular belief, you don't have to be penniless or flat broke to file for bankruptcy protection. In fact, the government has put certain laws in place so that an individual is allowed to have some financial resources available to draw upon to avoid being left destitute.
Considerations
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Filing for personal bankruptcy can provide significant relief from being harassed by creditors. Once you file, the court will issue what is called an "automatic stay" which instructs the creditors to refrain from contacting you during the filing process.
Warning
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Filing for any form of bankruptcy protection can be a stressful experience and will have a lasting effect on your credit rating. Therefore, it is not a decision to be taken lightly.
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