Brace yourselves, readers. I’m about to say a scary word. Bankruptcy. Are you still with me? Good. Getting past our fear of that word is the first step towards understanding what it is, when it should be (and should NOT be) used, and what the repercussions of that use will be. Growing up, I was terrified of that word. My father was a dairy farmer who, as our neighbors declared Chapter 12 bankruptcy one after the other, would sneer and say that “only social deadbeats take the easy way out by going bankrupt.” He was a stubborn man, and when we lost our farm to foreclosure, he took comfort in the fact that we never went bankrupt.
With the recent poor economy, bankruptcies had been skyrocketing. The bankruptcy rate hit its peak in 2010 (as seen by the 182,000 filing decrease in 2011), but there are still plenty of Americans teetering on the precipice of fiscal insolvency. The terrifying part of all of this is that too many people enter into bankruptcy without asking themselves or an expert the hard questions. When should you file for bankruptcy? What are the benefits of filing bankruptcy? Do I need a bankruptcy lawyer? What is the difference between Chapter 7 bankruptcy and the others?
First, let us start with the different types of bankruptcy. You cannot determine when should you file for bankruptcy if you cannot tell them apart. There are two (well, actually four, but Chapter 11 and 12 are nearly identical to Chapter 13) types of personal bankruptcy. Chapter 7 is a liquidation bankruptcy. Your debts are dissolved and partially paid off by liquidating all of your assets. Chapter 13 is a debt adjustment, where you essentially set up a payment plan that agrees to let you keep your belongings, but pay a reduced portion of your debt. Chapter 7 is far more common, accounting for 84 percent of bankruptcy filings in Michigan in 2011, compared to just 16 percent for Chapter 13.
In short, the answer to when should you file for bankruptcy is entirely dependent on your situation. Find the right attorney if you are considering bankruptcy. While some view bankruptcy as a fresh start or a reset button, that is simply not the case. Bankruptcy, even when it is the best option, has serious and long term consequences. Further, bankruptcy will not wipe out all of your debts. There are certain kinds of debt, like student loans, that are exempt from bankruptcy protections. A lawyer specializing in bankruptcy cases will be able to help you determine your options. If there is a way out of your debt without incurring the consequences of a bankruptcy, an attorney will help you find it.
See this link for more: michiganbankruptcyfirm.com
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