7 Reasons Of Why To File Chapter 13 Bankruptcy

By filing a Chapter 13 bankruptcy, you can negotiate an interest-free debt-redemption plan. You can consolidate your debts and repay your debt in between 36-60 months schedule. Chapter 13 does not require a means test like Chapter 7 bankruptcy, and is the best suitable alternative for most regular income-source people.

Chapter 13 bankruptcy was designed to facilitate people facing financial trouble avoid foreclosure while gradually paying the debts off.  When you file for Chapter 13 Bankruptcy the debt are prioritized by the bankruptcy court and decides who get paid first.

To prove eligibility for a Chapter 13 debt-recovery plan, you must have a regular source of income to repay the debt according to the plan approved by the court. You should be able to manage living expenses. Also you have to provide sufficient evidence that you will be able to make payments to the court consistently.

The top 5 reasons to file Chapter 13 Bankruptcy are:

REASON # 1

The best advantage of filing Chapter 13 bankruptcy is that if all payments have been made as scheduled, the court can admonish unsecured debt remaining at the end of the plan.

REASON # 2

You can obtain the automatic stay. I.e. The creditors are legally forbidden to contact you for debt repayment.

REASON # 3

You can freeze or negotiate certain secured debts to a lower amount.

REASON # 4

You can safeguard the interests of your co-debtors from paying obligatory amount which might otherwise occur in case of a chapter 7 Bankruptcy.

REASON # 5

The assets can be sold freely or transfer possession to a relative.

REASON # 6

You can restructure your existing business through a repayment plan.

REASON # 7

You can retain the non-exemptible property that might otherwise be repossessed in a chapter 7 Bankruptcy.

Becoming Debt-Free in Today's Economy

Today, when most people think of America's debt problem, they think of it on a national level and think about the federal and state governments. Sure the government has some severe spending issues and needs to get itself out of debt, but that is only part of the story. Over the last 10 years, Americans have become enslaved to creditors to the point of no return. When you rob Peter to pay Paul every month, it's pretty hard to ever consider becoming debt-free. Currently, in America the median household income is continuing to decline every year while people's debt continues to rise. In fact, consumer debt in the US since 1971 has increased by 1700%. I don't know about you, but this is craziness. The overall credit card debt of the entire US is $798 billion as of 2011. I think it's time that people should start considering filing bankruptcy. This amount of debt is unfathomable and never will be able to be paid off.

Americans need to get back to their roots and start paying cash for things. One way to do this is to file for bankruptcy and the individual will basically have no choice at least for a year or so. They will remember what they were told by their parents and grandparents of not spending what you don't have. With this kind of debt the idea of being debt-free is impossible. One of the side benefits of filing Chapter 7 bankruptcy for the individual that has a large amount of credit card debt is becoming debt-free or close to it. If a person doesn't have a car payment and all they have his medical bills and credit card debt, filing Chapter 7 bankruptcy will virtually eliminate all their debt with the outcome of being debt-free. This is probably the quickest and easiest way out of debt. If someone has $30,000 in credit card debt, outside of winning the lottery, the debt will probably never be paid off. Credit cards are making Americans slaves to the credit card companies that continue to accept only minimum payments while making huge profits on interest only.

Don't Wait Until It's Too Late For Bankruptcy Filing

While no one really wants to file for bankruptcy, sometimes there is no other feasible way out. Sure there is debt settlement and trying to continue kicking the can down the road, but at some point in time, filing bankruptcy might be necessary. It was reported in 2011 that the average American has over $16,000 in credit card debt. Although this number doesn't seem that bad, when including the average income of Americans to be around $35,000 a year, all of a sudden this number gets very large. The interest alone will keep this average person in bondage to the creditors for the rest of their life unless they do something drastic. Filing Chapter 7 bankruptcy by most is considered taking drastic actions. But when considering what it will do for these individuals it can truly be a blessing to get these ailing Americans out of debt quickly.

The first step to see if a bankruptcy filing is in your future is to add up all of your credit card debt and then budget the amount of money you can set aside to pay the bill down monthly without charging any more. If you can pay the credit cards off in 4 to 5 years, then technically you have a feasible solution to eliminate debt. It might be painful for this time, but it is doable. If there is no way you can pay these credit card bills off, then the only real solution is filing Chapter 7 bankruptcy. The only other option would be using debt settlement. Typically, debt settlement only works on balances lower than $10,000. The debtor has to come up with a lump sum for the creditor to negotiate their balance down. This is why it's a much better idea to spend your money hiring a bankruptcy attorney to file for bankruptcy. Filing Chapter 7 bankruptcy only takes about 4 to 6 months from start to finish and in the end many debtors exit being virtually debt-free.

What Happens To A Co-signer When You File Chapter 7 Bankruptcy?

Many people that are in financial trouble are very stressed emotionally. Making the decision to file Chapter 7 bankruptcy can still be difficult for the overwhelmed debtor. Getting advice from an experienced financial professional or a bankruptcy attorney can be critical to determine the best course of action. Once the decision has been made to proceed with filing Chapter 7 bankruptcy the individual usually experiences a huge sense of relief knowing that here is hope for a second chance for a stable financial future. However, what happens if the debtor has debts that are guaranteed by a co-signer?

Many lenders, whether car finance companies, mortgage lenders, credit card lenders, or any other kind of credit grantor, are in the business of calculating and managing risk. If an individual’s credit history has been poor for some time, the individual may be asked by the credit grantor to find a co-signer or guarantor.

A co-signer refers to another individual who is equally responsible financially with the other person for their debt. The co-signer has signed an agreement on the account or loan, which is referred to a “joint account”, and is therefore just as responsible for the debt. A guarantor refers to an individual who has agreed to take responsibility for payment on a debt in the event that the original debtor defaults on their financial obligation. A guarantor’s liability is considered a contingent liability meaning that the guarantor is only obligated to pay on the debt if the person has defaulted on their payments. The bottom line is, if the individual’s debts have been co-signed or guaranteed by another person, such as a friend or relative, then filing Chapter 7 bankruptcy could damage the friend or relatives credit. This is why it is imperative that the debtor seek financial advice from a bankruptcy attorney to discuss their circumstances and see what options are available. Many times the bankruptcy attorney can help the individual and their families avoid serious repercussions and/or minimize the financial consequences to all parties involved. In a nutshell, filing Chapter 7 bankruptcy can have many advantages for a financially overwhelmed individual, but they must weigh out all of their options carefully with the help of a professional.

Will Everyone Know I'm Filing for Bankruptcy?

In the past, filing for bankruptcy carried a stigma of failure or giving up. Because of the past stigmas, many people are embarrassed about people finding out of them filing for bankruptcy. This in fact is one reason why many tried to avoid the bankruptcy filing process. Their pride gets in the way and doesn't allow them to make a wise decision and get out from under the crushing debt. Instead, they continue making minimum payments to their creditors while their balances continue to stay the same. If only they would just go talk to a bankruptcy attorney they can find out how untrue their beliefs are.

While it is true that filing for bankruptcy is a legal resolution making it public record, there is no reason for anyone to find out unless you tell them. The only people that will be notified of the bankruptcy filing are the creditors and unless any of your employers, neighbors, family members and friends is listed as creditors they will not be notified of the pending bankruptcy. If a person has the situation of a family member being a co-signor on a auto loan or mortgage, it would be a good idea to discuss the idea of filing bankruptcy with that person so they don't get a call from a lender about the debt.

Basically, if the individual doesn't tell anyone, most likely no one will ever know about the bankruptcy filing. Using the reason of not to file bankruptcy because of what other people will think is foolish when a person has no way out of crushing debt. What's funny is, people have short memories when it comes to gossip like this, even if someone did find out and the further behind it gets the less people remember. Removing the stress of unmanageable debt is much more important than other people's opinions. In many cases, removing the stress by filing for bankruptcy will improve relationships with family and friends anyways. When someone becomes worried about being unable to pay the family bills, they should consult a bankruptcy lawyer to see if personal bankruptcy could help them.

What Does a Bankruptcy Lawyer Do?

With a large number of Americans filing bankruptcy, people in financial trouble are always looking for value when hiring a bankruptcy lawyer. With the introduction of the Internet, have come many do-it-yourself services some of which are good and others that are just scams. Before hiring a bankruptcy lawyer many people scour the web looking for a smoking deal for filing bankruptcy. As a rule of thumb, you get what you pay for. Although, this is not always true when hiring a bankruptcy lawyer. There are many attorneys that are very good at what they do and yet offer quite a value for the service they perform. When someone is filing Chapter 7 bankruptcy, many of them will see if it's easy enough to do it themselves. After downloading the bankruptcy petition online and muddling through the questions, they realize it's not as easy as it seems. Since the bankruptcy code change, filing bankruptcy has taken on a new complexity and really should not be attempted without the help of a bankruptcy lawyer.

There are many bankruptcy paralegals that work at a law office during the day and moonlight at night that offers services at a reduced rate. The only problem with these is they cannot give any kind of legal advice or recommend how to fill out the bankruptcy petition. Technically, all they are allowed to do is prepare the bankruptcy petition, after the individual submits all their income, financial and property information. Many times at the meeting of creditors or the 341 meeting, the bankruptcy trustee will ask the individual filing for bankruptcy how they selected their bankruptcy exemptions. If they get that deer in the headlights look from the individual, they will immediately turn their questions to who prepared the bankruptcy petition and did they offer any legal advice.

This is why, when filing for bankruptcy hiring a bankruptcy lawyer can be worth their weight in gold. When you consider the amount of debt that most people wiped out in a Chapter 7 bankruptcy, paying a bankruptcy lawyer a couple thousand dollars is really quite a value. The lawyer and their staff will be there to answer questions and make sure that the assets of their client are protected to the maximum amount. This knowledge comes with experience and that's what the individual is paying for.

Is Debt Settlement Better Than A Bankruptcy Filing?

With a large number of Americans in debt, many people look for shortcuts for a way to avoid a bankruptcy filing. Many of these same people will try and use debt settlement as a way to fix their debt problems. If the ads on TV are correct, they should be able to eliminate their debt for 50% of the balance. Don't get me wrong, debt settlement has its benefits when used for the proper situation. If a debtor has $30,000 in credit card debt, to have a debt settlement company negotiate the debt down 50% would leave the debtor owing $15,000 plus a fee to the debt settlement company. If someone is having problems making their payments on the $30,000 in credit card bills, how would they ever come up with about $18,000 to pay this off? Where debt settlement is good is for an individual that has a low income and has about $5000 in credit card debt and doesn't have the ability to pay it. They might be able to afford to pay off half of this not the whole thing. In this case, debt settlement would be the best form of debt elimination for this person.

It's very common for a bankruptcy attorney to have people walk in that were failed customers of one of these companies and were unable to ever come up with the amount asked for. Typically, it goes bad quickly for these debt settlement clients. When someone is using this to eliminate their debt, the creditor has no obligation to abide by any of the rules. In fact, they even have the ability to cancel the program midstream making the debtor once again liable for the entire balance. This is why for large amounts of unsecured debt; filing bankruptcy is the only way to go. Filing Chapter 7 bankruptcy gives the debtor the power of the U.S. Bankruptcy Court to protect them once the bankruptcy petition is filed. They also will have a bankruptcy attorney to stand front and center to block the flaming arrows from the creditors. While debt settlement has its place in debt elimination programs, before using one an individual should first consult a bankruptcy attorney to see which is best.