What is Bankruptcy?

A petition is filed which would state that the debtor won’t be able to pay the debts that is owed by him. A court procedure is involved before filing for bankruptcy. The debtor gets a debt relief but he has to pay for an easy get away as its after effect is very harmful. There are two types of consumer bankruptcy which are specially found in US and California: Chapter 7 bankruptcy and Chapter 13 bankruptcy. The bankruptcy lawyers are there to you help in the court proceedings.

What are the ill effects of bankruptcy?

Filing for bankruptcy can ruin your credit report as it stays on your record for 10 years. It makes things difficult for the bankrupt as he can not acquire credit to buy new home or indulge into any luxurious products. Debts like student’s loan and back taxes are two prime example which fall under non dis chargeable debts even after filing bankruptcy.

Bankruptcy is all about disrobing yourself in public. As you have to declare in the news paper as well as in the court paper that you are “bankrupt”. An explanation has to be provided to the judge for the cause of filing bankruptcy and how you got into such financial catastrophe.
Filing bankruptcy would not only bring down bad name upon you but also to your family. It would make your life difficult as it would be hard to find a job and no one would easily rely on you.

Difference between chapter 7 and chapter 13:

A Chapter 7 bankruptcy, is quite familiar as a liquidation bankruptcy. The debtors have to surrender all non-exhausted assets to the court. The assests would be sold off for repayment to the lenders. Chapter 7 bankruptcy gives provision to the debtors to keep property for instance cars, their home, retirement,accounts, and so on. After the assests are sold, the amount would be well distributed among the creditors.

There are three general characteristics for filers in Chapter 7 bankruptcies:

1. People with irregular or irratic income usually file for bankruptcy.
2. People with assets the are taxable property such as home, vehicles, and retirement accounts
3. They would fail to pay on a regular basis on a repayment plan

Chapter 13 bankruptcy results in a repayment plan, the debtor submits the expected amount to the court. The repayment plan is designed in such a way that it reduces the total amount of debt and it is a five year plan with in which the debtor has repay. Once the court approves the plan and after the payment has been made by the debtor then the borrower can lead a debt free life.

Bankruptcy is opted by people who are:

• Does not want to lose their non-exempt property
• Has a regular flow of income
• Can follow a disciplined payment plan and can stick to budget.

So these are the few marked differences found between chapter7 and chapter13. Although it is advisable not file for bankruptcy. As it has negative effect on credit record.