Does Bankruptcy really help you get out of Debt?
Paying off debts often becomes a major problem for most consumers. Almost every consumer wishes to free himself from the clutches of debt irrespective of whether he is in serious debt problems or making minimum payments towards a small amount of debt. But when consumers fail to pay their credits due to increased amount of debts, they generally consider filing for a bankruptcy case.
Does the bankruptcy really help you to get out of debt?
It is a general conception that bankruptcy may be helpful as it makes one debt free within a few years or helps a debtor clean up his debts at a single chance. But what about its affect on the individual’s credit report that can prevent him from getting loans in future. Bankruptcy is not the only way to get out of debts, rather it should be considered when all other plans fail to work out. Moreover, it isn’t easy to file bankruptcy now since the new bankruptcy law will be coming into effect. Filing for bankruptcy makes one go through a complex legal process that has an adverse effect on his credit rating.
Bankruptcy is a legal procedure by which the individuals and business houses can pay off their debts under the supervision of a bankruptcy court or wipe off their debts altogether.It prevents your creditors from debt collection actions without the court’s approval.
In case you intend to file bankruptcy, you can approach the court and file the list of all outstanding debts and assets. But you can only sell off those assets which are non-exempt, that is, which can be used for the repayment of debts. However, under the new Law, it is not that easy to qualify for bankruptcy. This is because the new law would require a debtor having salary above the median income level to undergo credit counseling at least 180 days prior to filing for bankruptcy.
The credit counseling services check out whether debtors can pay at least 60% or more of their debts so that they don’t have to file bankruptcy. Moreover, those opting for bankruptcy will have to go through a Means Test which can determine the type of bankruptcy that he should file. When you qualify through the Means Test, the court appoints a bankruptcy trustee to supervise the payment of your debts. Usually payments towards secured debts like mortgages are given priority over unsecured debts during a bankruptcy case. Otherwise the lender may take away the property acting as collateral for the secured debt.
THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY. THIS IS IN NO WAY GIVING ANY LEGAL ADVICE OR REPRESENTATION. THE INFORMATION CONTAINED HEREIN WAS COMPILED FROM VARIOUS ARTICLES. FOR ANY LEGAL ADVICE OR REPRESENTATION SEEK YOUR OWN LEGAL COUNSEL.