Personal - The Last Solution Should Be
Bankruptcy
A debt solution like bankruptcy should really only be used as a last
possible solution. The problem with this solution of debt problems is
that it includes a lot more than simply eliminating debt. When someone
declares them self bankrupted, all debt collection actions against that
person are prevented. The court grants an "automatic stay", which - with
a few exceptions means that creditors cannot come after the money owed
to them.
The most important exception is that when a loan is secured by
property creditors can seek relief from the stay and seize that
property. The other exceptions are student loan debt, alimony, child
support and taxes. The backside for the person who seeks this solution
to eliminate his debt is that he or she must hand over all non-exempt
property. This property is then sold and the proceeds are distributed
amongst the creditors.
There are two types of this solution of your debt problems:.
Chapter 7
which states that a person is required to hand over much of their
property, but creditors cannot seek damages from further income.
Chapter 13
allows a person to keep most of their income, but have to make a plan
to pay the debt back to creditors based on their future income. Under
this plan, the court can require individuals to live within a very
strict budget.
As you see, there are downsides to both debt elimination plans. One
of the biggest downside is that both debt erase plans will significantly
impact a person's credit rate. For this reason, declaring yourself
bankrupt is a solution of your debt problems that should be evaluated
very thoroughly and carefully. Other debt solutions like debt
negotiation, debt counselling and debt consolidation should definitely
be considered first.
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