Declaring Personal Bankruptcy

A lot of people have financial problems. Often, the problems begin with either losing a job, having hours and income cutback, or having serious medical expenses. Many people think of filing bankruptcy, but declaring personal bankruptcy may or may not help and, if it will help, should not be taken lightly.

First, bankruptcy will not help everyone having financial difficulties. There are two types of bankruptcy that most people use: Chapter 7 and Chapter 13. These are named after their respective chapters of the US Bankruptcy Code. Whether bankruptcy will help a person depends on the type of bankruptcy, the types of debts a person has, and the person's expectations and desires.

Chapter 7 bankruptcy is best suited for people who have unsecured debts (example: credit cards, medical bills, etc.) and own very little property or property in which there is very little equity. Chapter 7 bankruptcy is a liquidation bankruptcy and property that is not exempt or in which a person has equity may be sold and the net proceeds distributed to creditors. For instance, if a person owns jewelry worth $20,000 and owes nothing on the jewelry, the jewelry will likely be sold and the net proceeds distributed to creditors.

Chapter 13 bankruptcy is best suited for people who have both unsecured and secured debts that they are having a difficult time paying and they have property that they do not want to lose. Chapter 13 is a bankruptcy court ordered payment plan whereby people pay their creditors over time either all or a portion of the amount owed to their creditors. A person's property is not sold to pay debts. Debts are paid from a person's income.

For some people, neither a Chapter 7 bankruptcy or a Chapter 13 bankruptcy will help. For instance, neither type of bankruptcy will help a person who is having difficulty paying his monthly bills if the person owns property, but does not have a regular income.

Additionally, people must qualify for bankruptcy and the qualifications are different for both a Chapter 7 and a Chapter 13.

A lot of people, who finally conclude that filing bankruptcy is their only option and then go ahead and file bankruptcy, find that bankruptcy gives them relief. Creditors stop calling. Unfortunately, bankruptcy will be on a person's credit report and whenever the question "have you ever filed bankruptcy" is asked, the answer will have to be yes.

It is strange, but declaring personal bankruptcy is critical to some creditors and not critical to others. For some creditors, the fact that someone filed bankruptcy in the past is not a big deal. For other creditors, they will not even consider dealing with someone has filed bankruptcy in the past.

This is general information. If you need specific information or have any questions of any nature whatsoever, talk with a lawyer licensed in your state.

For more general information, see Bankruptcy . For more detailed information see Bankruptcy Information.

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