Bankruptcy May Be Your Way Out

By: Ken Charnley
Submitted: 2007-01-17 16:17:22
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Have you suddenly found yourself swimming in rivers of debt? Have you found yourself avoiding the phone like the plague daily because of harassing creditors? Are you out of money? Have you, without knowing it, overextended yourself? If you can answer these questions with a yes, bankruptcy may be the answer for you. Many people who cannot pay their bills and are grossly involved in debt opt for bankruptcy. Within the United States, there are two specific bankruptcy types known as Chapter 7 and Chapter 13.

The most common form of bankruptcy is the Chapter 7. This option allows people to liquidate non-exempt assets by selling them to apply them to their debt.

A Chapter 13 bankruptcy allows a business or individual to undergo a court-approved reorganization of their debt. This type of bankruptcy gives the debtor time to repay their creditors, typically within a three to five year period of time. During this time, if a creditor wishes to pursue collection efforts, they can only do so through the courts. In most cases, those filing a Chapter 13 bankruptcy, are able to keep their property.

Over the years, the laws of bankruptcy have changed quite a bit. For example, now any person filing for bankruptcy, according the laws, must attend credit counseling. Furthermore, those filing bankruptcy must adhere to the new laws and go through what is called a means test. The means test is used to determine which type of bankruptcy the person can file under. If the person earns less than the state’s median income or not.

If they do earn less, they are required to file a Chapter 7 bankruptcy. This means they may be required to sell off some of their property and assets in order to cancel the debt. If they find that they earn more than the median income in the state, they are required to file a Chapter 13 bankruptcy and repay the debts through a plan.

Before you file bankruptcy, you should consider all of these aspects and talk to a lawyer that is well versed in the proceedings and laws as they pertain to bankruptcy. They will help you in knowing which chapter you must file under, by looking at your debt and your income.

Ken Charnley is a personal finance publisher whose website Bankruptcy Loans is dedicated to quality information on Bankruptcy faqs & Loans. For all your Bankruptcy faqs needs visit and Apply for Bankruptcy Loans Online

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