Home > Law Articles > Start A New Chapter In Your Life - Filing Personal
Bankruptcy

Start A New Chapter In Your Life - Filing Personal
Bankruptcy

by Philippa Munster

Staying ahead of your financial responsibilities is not
always easy; sometimes finances end up leading us rather
than the other way around. Bills start to pile up until we
get too far in debt. Then, we're forced to stop and ask
ourselves how we got in there. Sometimes, the guilt points
right back at us. But, sometimes, bad things happen outside
our control. When finances are so out of control, filing
bankruptcy seems like the more viable solution and a way to
get a new start.

Every state has its own interpretation about bankruptcy and
filing chapters. Some states allow you to hold onto your
assets while other states grab hold of everything you own
and require you to turn over ownership. Nearly every state
requires that bankruptcy is stated on your credit history
for at least 7 years. Most mortgage companies prefer that
you have a clear record for at least 3 years beyond the
bankruptcy claim before they will consider you viable for a
loan.

The laws surrounding filing bankruptcy are very complex.
Bankruptcy comes in various forms and follows the laws set
in chapters. Most personal bankruptcy is handled under
Chapter 7, which discharges or cancels all debts. However,
the larger debts such as a home loan must be paid with
personal collateral or returned to the creditor. In Chapter
13, you consolidate your debts and make one payment to the
court for a set amount of time such as 3 to 5 years. Most
people who file Chapter 13 retain their property but must
prove that their monthly income exceeds their monthly living
expenses. The other common types of bankruptcy - Chapter 11
and 12 - are reserved for corporations and businesses that
are closing or reorganizing.

Why don't more people file chapters if clearing your debts
is such a useful way to rid of heavy expenses? Quite simply
stated, filing hurts your credit. This bad credit ends up a
curse that follows you for a very long time. Whenever you
file for a loan, your credit report screams "Bankruptcy,
Beware!" You can kiss goodbye chances at getting a loan.
Even if a creditor says they'll give you a loan, you can
bank on paying the highest premiums or large interest rates.
You may even have to take out a second loan to pay for the
down payment on the first loan. While that might not sound
bad at first, these "too good to be true" deals are usually
ways to spiral you down farther. You're better off waiting
a few years for your credit history to clear and then
approach a different lender later on.

Consolidating your loans and debts isn't always a bad move;
however, these offers should be carefully reviewed.
Numerous reports online through the Federal Trade Commission
(FTC) discuss bad debt-counseling practice and counseling
firms that work better than filing Chapter 13. To read more
reports and to information about side stepping bankruptcy,
visit the American Bankruptcy Institute at
http://www.abiworld.org.

Copyright 2005 Philippa Munster. All rights reserved.

About the Author
Philippa Munster is the owner and operator of Bay
Bankruptcy which is a useful source for information on bankruptcy on
the internet. For more information visit her archive
of articles here: http://www.baybankruptcy.com/

Submit Your Law Article
If you would like to submit an article for publication on Lawyer Spot, submit your article here.

Home > Law Articles > Start A New Chapter In Your Life - Filing Personal
Bankruptcy