Nobody thinks that they will ever face a bankruptcy. For most people, it is a slow process of decent into ever increasing debt. There are many reasons for this. Sometimes it is due to a loss of a job, especially permanent job loss due to an entire industry being depressed or entire factories shipped overseas. Medical bills are another example. Over time, these bills can become so large that you will never be able to pay them back. This is why bankruptcy laws exist. However, there are a few things you should know about them.
You need to qualify for a bankruptcy
There are certain standards that have been enacted into law that an individual must meet to qualify for bankruptcy. There are several elements of qualification, with your income being the most notable. You will need to earn less than the median annual income for the state you live in. In addition, there are two types of bankruptcies, Chapter 7 filing and Chapter 13 filing. The first has the most stringent qualification standards, but it can eliminate most of your debts and give you a fresh start. A Chapter 13 filing has less stringent standards, but you will be paying most of your debts back. The debts are simply rearranged and stretched out over several years.
Certain debts are exempt from bankruptcy
Some people are under the mistaken assumption that all of your debts are washed away, but this is simply not true. Many debts are excluded from bankruptcy. For example, any secured debts must be paid. You will need to liquidate the asset and pay your creditor. Back child support must be paid. A parent is not exempt from obligations to their children. You also must pay back college loans, but there are certain exceptions for hardship. An attorney can provide you with details. Also, back taxes you will have to pay back, but there are possibilities with making payments to give you a chance at paying back your taxes without continuing to be penalized.
A bankruptcy can address home foreclosure
If your house is not in foreclosure but that may become a reality in the near future, a bankruptcy may allow you to take your past due payments and add them to the end of the mortgage. This may be possible if you can demonstrate to a judge that you have the ability to make your current mortgage payments. If your house is already in foreclosure, a bankruptcy filing will only stop the proceeding temporarily, but it will give you time to plan your move.
Bankruptcy is certainly not a panacea, but it can give you reprieve from the burden of debt and give you a chance at a new future. To receive the best and most up-to-date information on bankruptcy, always consult with a bankruptcy law attorney.