Last year, more than two million people tried to file for bankruptcy. Before you decide to file for bankruptcy, you should do some research to find out what it is and if you really need it. There is a difference between bankruptcy for consumers and bankruptcy for cities or towns. Most people file for bankruptcy because they can't pay their bills, like credit card debt, medical bills, and car loans. Secured loans like student loans or child support are one of the few things that are not covered by bankruptcy, no matter what kind it is.
When a city, town, or even a school district files for bankruptcy, this is called "municipal bankruptcy." It used to be called "Adjustment of Debts of a Municipality," but now it's part of chapter 9. Depending on which chapter of consumer bankruptcy you file, you might be able to keep some of your things. Basically, if you are eligible to file for bankruptcy after getting financial counselling, you need to choose which chapter is best for you.
Chapter 13 lets the consumer keep everything they owe money on, but they have to pay back their debts over a certain amount of time, usually three to five years. Consumer bankruptcy is the most common type of bankruptcy because everyone seems to be a consumer in some way. But there are ways to get back on your feet, such as pre-filing counselling and great organisations that help with debt consolidation.
Once you get the ball going in that direction, it's hard to stop it. There is one way you can cut down on how long you have to be bankrupt, though.
If you file for Chapter 13 bankruptcy, you usually have between three and five years to pay off your debts and get out of bankruptcy. In a Chapter 13 bankruptcy, a payoff amount must be given. This means that when you file a Chapter 13 bankruptcy, you are given a payment plan for the whole debt. If you own a home, you can use the equity in your home to pay off the rest of your chapter 13 bankruptcies. You can do this by either getting a home equity line of credit or refinancing the loan you already have. There are benefits to either option and the choice really will depend on what fits your family, and financial ability.
Often times you can find a lower interest rate for your home loan then the one you currently have which will save you money and allow you to have a longer time to repay your loan. You might also be able to lower your monthly payments, which can help you out financially during this hard time. To be able to do this, you must make sure that when you file your Chapter 13 bankruptcy papers, you are allowed to take on more debt while you are in bankruptcy. If you are not allowed to incur debt then you will be unable to refinance or get an equity line of credit.
