Without proper money management and debt management measures, and sometimes even in spite of them, the end result is often bankruptcy. But what exactly is bankruptcy and what can you expect from it?
Filing bankruptcy used to be a common practice to ease people’s finances easily and effortlessly at the expense of creditors. But since the Bankruptcy Abuse Prevention and Consumer Protection Act went into effect in 2005, bankruptcy filings have dropped dramatically.
The problem is that the new law has set the limits too high and now few can qualify for the relief that bankruptcy provides, although no one would want to be in such a situation.
Chapter 7 Bankruptcy and Chapter 13 Bankruptcy
There are two types of insolvency proceedings according to current legislation. The two processes are completely different and should be considered as such. Chapter 7 bankruptcies provide a solution to extreme situations where the debtor can no longer pay the debt and needs to start over.
This type of bankruptcy eliminates debt by paying off a portion of the outstanding debt with each creditor through the sale of the debtor’s assets.
Chapter 13 bankruptcy, on the other hand, does not necessarily involve the sale of assets. Instead, the debtor and the community of creditors, with the help of the court, negotiate new terms and establish a new payment schedule that must be feasible, affordable, and economically viable for both the creditors and the debtor.
What if I file for bankruptcy on my own?
By now you’ve probably heard: Why pay thousands of dollars in legal fees when you can file for bankruptcy on your own? The question is, can everyone do it? The truth is that it can be done, but a lawyer will likely save you a lot of hassle and probably money as well. Legal experts are familiar with all the technicalities that can bring you greater financial ease.
In addition, the new bankruptcy law requires that you obtain credit counseling prior to processing your bankruptcy forms. Therefore, you will already be familiar with your situation and possibilities and will have enough information to decide whether or not you need legal assistance if bankruptcy is your only option.
In any case, you should always contact an attorney if you are unsure how to go about this process.
Foreclosure is a risk, be protected
Your mortgage can jeopardize your property if you don’t pay it. Financial failure can mean you lose your property to foreclosure. If your home loan lender is threatening you in any way, if you receive a notice of possible foreclosure, or even if you think something is going on because the lender is no longer trying to recoup the investment, you should contact an attorney immediately. There are foreclosure attorneys who specialize in these matters and will be able to help you keep your property if possible. Just remember that when it comes to this topic, time is of the essence.
