If your spending got a little out of control or circumstances you couldn't control took a chunk out of your income, you might feel like you are swimming in debt. Bankruptcy is one option that you have to get control of your finances again so that you can start to rebuild your life. Before you make the decision to file for bankruptcy, there are some specific things you should know. There isn't any reason you and your family should have to deal with the constant stress of uncontrollable debt.
There are different forms of bankruptcy
The Bankruptcy Code sets different forms of bankruptcy according to the filer's circumstances.
- Chapter 7 bankruptcy is for people who don't have assets that they can use to pay off debts. This is known as liquidation bankruptcy, which means you wouldn't have to pay back the debts.
- Chapter 13 bankruptcy is for people who work and want to repay their debts, but need a structured way to make those payments. In this case, you would work with a bankruptcy trustee to get the debts repaid.
- Chapter 12 is for fisherman and farmers who need to continue to work and pay with their active seasons.
Bankruptcy can stop creditor harassment
Some creditors use unscrupulous methods, including threatening the person with time in jail, to collect debts. Hearing someone threaten you with this might frighten your children. These threats are illegal under the Fair Debt Collection Practices Act. An automatic stay stops creditor harassment when you file for bankruptcy. This can help to stop the threatening phone calls that might scare your children or spouse. It stops creditors from sending any messages or letters in an attempt to collect a debt. Some creditors might apply to have the stay lifted, but until this occurs, the threatening communications must stop.
You might be able to keep your home and car
Bankruptcy laws contain clauses that enable you to keep your home and your car in some cases. If this is a concern, be sure you find out what is possible with the chapter you plan to file under. It is imperative that you understand the terms under which this might occur. Typically, you will have to part with certain assets when you file for bankruptcy. You mustn't let this disturb you too much because you will have a chance to rebuild your assets in a responsible manner after you have completed the bankruptcy process.