Chapter Bankruptcy - Know This Before Filing Bankruptcy

At times managing finances can feel overwhelming. There are so many options and methods, but how can anyone be sure which is the most appropriate decision for their circumstances? All this confusion often leads to matters becoming worse instead of better. This is especially true if a plan of action isn’t put in place soon enough and debt has already become unmanageable. With our current economy many situation outside of our control are also now affecting our finances. The combination has led to many people considering chapter bankruptcy.

Once a consumer has decided they are unable to repay a debt after exhausting all other options they may resort to filing bankruptcy. However, understanding chapter bankruptcy and bankruptcy law can be very confusing. It is best to consult with a chapter bankruptcy professional. To get you started, this article covers the basics of bankruptcy law and the different forms of chapter bankruptcy.

Bankruptcy law was changed a great deal when the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) was passed in 2005. This act was in response to the idea that legislature felt bankruptcy was being taken advantage of. To defer consumers from filing bankruptcy there were many diversions put into place. One of which is the “means test” which makes it difficult for most people to now qualify to be eligible under the bankruptcy law requirements even though they are experiencing financial anguish.
However, due to the current economic situation in the US bankruptcy law is now being scrutinized, and Senator Barack Obama has vowed to reexamine the law which could be made to again make it easier for citizens filing bankruptcy.

Chapter 7 Bankruptcy – This chapter bankruptcy involves liquidation of assets (if the debtor has any). Bankruptcy law on property exemption with regards to liquidation is different by state. Filing bankruptcy under Chapter 7 can only be used once every 8 years.

Chapter 13 Bankruptcy – This chapter bankruptcy involves possessions which are considered retains but future income made over a three to five year period will be committed to paying creditors back. Some creditors may receive more than others.
Chapter 11 and Chapter 12 Bankruptcy – These are bankruptcy options for businesses. Both focus on the possibility of reorganization as a means to correct financial problems. However Chapter 12 is for smaller businesses for which there is a limit to the size.

Regardless of which bankruptcy option is chosen the best thing to do is become an informed consumer. Know the rights of the laws that protect consumers and the laws that make it difficult for consumers to protect themselves. Consult with credit professionals, not just the credit counselors who often do not need to have a financial background to secure a position with a consolidation company. Although debt can feel devastating it can be overcome and it should never be forgotten that it is a temporary problem with many solutions.