Are you in debt? How filing for bankruptcy might be right for you

If the thought of your mounting debt leaves you feeling overwhelmed, filing for bankruptcy might provide you with the relief you desperately need. Even though filing for bankruptcy is never an easy decision, it might just be the right one. Bankruptcy laws are aimed at providing debtors with a fresh start, particularly after devastating events such as the loss of a job or a sudden illness. For those of you contemplating bankruptcy, it is important to understand which filing is right for you. Most debtors file under Chapter 7 (straight liquidation) or Chapter 13 (reorganization). When a debtor files under Chapter 7, the bankruptcy trustee gathers and sells the debtor's nonexempt assets and uses the proceeds to pay off creditors. Before filing for bankruptcy, there are certain requirements a debtor must meet. For instance, a debtor must, within 180 days before filing, receive credit counseling from an approved counseling agency. This process doesn't take too long and is relatively inexpensive, but it provides the debtor with a good understanding of their financial situation.

Chapter 13 allows debtors with a regular income to develop a repayment plan in order to pay all or part of their debts. Debtors make installments to creditors through a bankruptcy trustee over a period of three to five years. After successful completion of the repayment plan, debts are discharged. For individuals facing foreclosure, they may be able to temporarily stop the sale of their home by filing for bankruptcy under Chapter 13 (automatic stay). Even though filing for bankruptcy will not get rid of a mortgage debt, a debtor may be able to work out a payment plan to get caught up on missed mortgage payments. Furthermore, filing for bankruptcy will provide a debtor with additional time to look at other options.

Regardless of which chapter you file under, it is important to note that some debts are generally not dischargeable. For example:

- Student loans
- Alimony and child support
- Taxes
- Debts for willful and malicious injuries to person or property

Bankruptcy relief was meant to help debtors resume and take control of their lives. It is important to speak with an attorney and determine whether bankruptcy is right for you.