Federal laws govern the bankruptcy laws in the United States. However, there are state laws as well. Those who are planning to file for such a financial undertaking must abide by the laws of their state. A judge in their district must approve their petition to file for bankruptcy before they can proceed.
The Most Common Types of Bankruptcy
There are different types of bankruptcy that people can file when they are having extreme difficulty in paying off their debts. Chapters 7,9,11,12,13 and 15 are currently the types that a person or a group of people can file. The types that are most commonly filed are Chapters 7 and 13. These types will involve credit solutions that require debtors to turn over all of their non-exempt property to a trustee. The trustee will then make sure that the properties are sold and the proceeds are use to pay of the debtor’s financial obligations.
Chapter 13 will allow debtors to keep some of their property like their house and cars. However, a judge will have to approve their plan to repay their debt. If they do not meet the requirements of their repayment plan, their creditors have the right to take the property that was initially protected.
In 2005, the laws were changed to prevent people from abusing the system. Before then, there were many people who used the laws to write off their credit card debt even if they had the capacity to pay for it. The new law requires people to pay off all their debts as long as they have the ability to do so.
Finding a Credit Solution Outside of Bankruptcy Laws
Although there are upsides to filing for legal declaration, it is always recommended for debtors to always try to repay their debt through any other credit solution whenever it is possible. They should always try to work things out and only use it as a last option. The creditors that they owe money to may be willing to work things out with them to keep away from court.
Before filing for any type, debtors should try to renegotiate the interest rates that their debts are subject to so that they can get out of debt faster. Also, if they can, they should offer some money upfront to increase the chance of their creditors working with them to find a mutually beneficial credit solution for the repayment of their debt.
If debtors find that the only possible credit solution to their situation is going bankrupt, they should obtain the services of a lawyer who will guide them through the process. Doing so will not only ensure that everything goes as smoothly as possible with their filing but also that they are making the right choices.