Personal Bankruptcy

The goal of filing personal bankruptcy allows you to get a fresh financial start by wiping away your debts and making it easier to handle your other bills. Before filing personal bankruptcy, it’s important to be as informed as possible so that you make the best financial decisions for your situation.

Types of Personal Bankruptcy

Individuals can choose from various forms of personal bankruptcy depending on the type of debt, its amount, exemptions available and the assets they own. The types of bankruptcy are named after the corresponding chapters outlined in the code.

Chapter 7 was established to release you from personal liability for specific types of debt. Basically it’s as if the slate is wiped clean – you no longer owe the debt. Certain assets may be sold by the trustee so that the creditors can receive some payment.

Chapter 13 is another popular, personal bankruptcy. You are responsible for drafting a repayment plan to show how you will pay off some of your past due debts within three to five years. Chapter 13 does allow you to retain some of your property like your home and or car, even if you are behind on the payments. You plan will include re-establishing these payments as well.

What is a Discharge?

A discharge releases you from personal liability related to certain types of debt. It acts as a direct and permanent order to your creditors informing them that they can longer contact you to collect a debt. Any further communication in the form of letters, email, legal action or phone calls must stop immediately. The exception to this is secured debt. In this situation creditors can take action to repossess property.

Filing Without Your Spouse

You can file personal bankruptcy without your spouse; however your spouse will still be responsible for any joint debts. In some cases filing for bankruptcy together will increase your exemptions. In cases where only one spouse has outstanding debts, it may be wise that they file alone. Keep in mind that if you have joint debt, one spouse’s discharged debt may show up on the other’s credit report.

Bankruptcy and Your Credit Rating

A bankruptcy will show on your credit report for the next 10 years; but if you are already hopelessly behind on your bill your credit rating is probably already negative. Bankruptcy wipes away your old debts which can make it much easier to pay your bills. One of the fastest ways of re-establishing your credit rating is to get a credit card and mindfully make payments on the new debt on time.