Part 1: A Brief Explanation of Bankruptcy And A List Of DONT'S
Let's face it, filing for bankruptcy is a big deal. It's the most extreme of all financial makeovers, and financial analysts continue to warn us that it should be a last resort that should not be entered into without knowing what you are doing.
Bankruptcy is etched onto your credit report for a full ten years. One decade. And without an adequate credit report, it can put a damper on your ability to obtain a car, living situation or employment. If you are filing, do your best to plan for your bankruptcy.
In America, there are five chapters of bankruptcy that you can file for. Chapter seven is the most common form. When you file Chapter 7, a trustee will collect non-exempt property and then they will sell it and distribute the proceeds to your creditors. Chapter nine is a bankruptcy that is only available to municipalities. It's pretty much a form of reorganization, not liquidation.
Chapter eleven, twelve, and thirteen are more complex and they involve letting the debtor keep some or all of her property while they use future earnings to pay off the debt. Most consumers file chapter seven or chapter 13. Chapter 11 filings are mostly for businesses, individuals are allowed, but are rare. Chapter twelve is similar to Chapter 13 but is only available to "family farmers" and "family fisherman" in certain situations.
And now its time for the list of bankruptcy DON'Ts.
First off, don't use your credit cards once you've made this decision. It's just a bad idea to incur even more debt that you don't intent to repay. It makes you look suspicious, so you could lose your right to cancel out that debt in the bankruptcy. Thing is, there were bankruptcy reforms in 2005 that are responsible for lowering the threshold on so called luxury purchases to five hundred dollars and extended the abuse period to ninety days before filing. Anything you buy in this period will be under extra scrutiny.
Bankruptcy is etched onto your credit report for a full ten years. One decade. And without an adequate credit report, it can put a damper on your ability to obtain a car, living situation or employment. If you are filing, do your best to plan for your bankruptcy.
In America, there are five chapters of bankruptcy that you can file for. Chapter seven is the most common form. When you file Chapter 7, a trustee will collect non-exempt property and then they will sell it and distribute the proceeds to your creditors. Chapter nine is a bankruptcy that is only available to municipalities. It's pretty much a form of reorganization, not liquidation.
Chapter eleven, twelve, and thirteen are more complex and they involve letting the debtor keep some or all of her property while they use future earnings to pay off the debt. Most consumers file chapter seven or chapter 13. Chapter 11 filings are mostly for businesses, individuals are allowed, but are rare. Chapter twelve is similar to Chapter 13 but is only available to "family farmers" and "family fisherman" in certain situations.
And now its time for the list of bankruptcy DON'Ts.
First off, don't use your credit cards once you've made this decision. It's just a bad idea to incur even more debt that you don't intent to repay. It makes you look suspicious, so you could lose your right to cancel out that debt in the bankruptcy. Thing is, there were bankruptcy reforms in 2005 that are responsible for lowering the threshold on so called luxury purchases to five hundred dollars and extended the abuse period to ninety days before filing. Anything you buy in this period will be under extra scrutiny.
About the Author:
Mallory Megan works for a debt collection company. Also she writes articles on business, finance, consumer spending and collection agencies.
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