Get Rid of the Myths and Reveal the Truths about the Process
Bankruptcy is a legitimized process to deal with those debts that the debtor cannot afford to pay. A legal and successful bankruptcy proceeding can free the debtor from unrealistic and overwhelming debts and help him/her to start a fresh financial career. Nevertheless the freedom does not come in free and is subject to some restrictions and disadvantages as well. The process makes it sure that the remaining assets and property are shared out fairly among the creditors. However easy it may sound, but Bankruptcy for ages has stirred negative emotions and fears in the minds of debtors, who under utter pressure take up to this last resort, when all debt repayment plans fail to comply with their deplorable financial position. All major debt relief companies advocate the avoidance of bankruptcy, by providing debt cure services like debt settlement, debt consolidation and debt management plan, however many still harbor certain myths and fallacies about bankruptcy, and thus tend to take a misled decision regarding it. For instance debtors might find it an easy way out to escape their debts and creditors’ pressures, as bankruptcy sometimes is referred to as a fresh financial start with the end of all monetary traumas and painful liabilities.
To some extent it definitely is; but one should know the extent of its positive possibilities and the plane from where its disadvantages start. For example, it might turn into a living nightmare when the debtor would come to know about its negative influences on the credit report for 7 to 10 years, on future financial plans, on forth-coming job prospects and on familial conditions. It has the power to alter your life and psyche for a considerable period of time, which if you fail to control or rectify, can disrupt both of them forever. Nevertheless, for the destitute who have lost all in debt and its repayment process, bankruptcy remains as a final option which ends all extraneous economic liabilities and lets the debtor start from the scratch once again.
The two most popular types of bankruptcies that debtors apply for, which are:
Chapter 7: This form of consumer bankruptcy can also be named as liquidation under US bankruptcy Laws, which helps to eliminate unsecured debts like credit card outstanding, pay day loans, medical bills and personal loans. This is an apt option of those belonging to lower income groups, who are extremely overburdened with unaffordable and enormous amount of debts and deficiencies, without possessing large properties. However, one should keep in mind that not all debts can be discharged through Chapter 7 Bankruptcy and those obligations should be well-considered by the applicant of this form. Moreover, the debtor has to pass through a Means test which includes the assessment of the debtor’s total outstanding, assets, properties and income sources, followed by a credit counseling session with a debt lawyer.
Chapter 13: This form of consumer bankruptcy can also be called a ‘wage earner’s bankruptcy’ which includes the provision for the debtor to consolidate his/her entire debts to a single interest-free amount which the debtor has to pay each month to a trustee who in turn would be responsible to pay the creditors. It is a kind of debt-repayment plan which deals with situations like foreclosures, repossessions, wage garnishments etc. This option of bankruptcy proves apt for debtors who want to acknowledge and repay their debts in due course of time in order to keep their homes from being foreclosed or to stop their vehicles from repossessions. They belong to the higher socio-economic sections who have enough monetary affluence to avoid complete liquidation, provided they are given some more time and consideration.