Stay Away From Bankruptcy

What is bankruptcy?

Bankruptcy, in legal terms means that a person or organization is unable to pay creditors. The main objectives of bankruptcy are:

- To allow honest debtors a new start
- To start repaying debts in a period of time that fits the debtor

Several kinds of bankruptcy exist; Chapter 1, Chapter 3, Chapter 5, Chapter 7, Chapter 9, Chapter 11, Chapter 12 and Chapter 13, but above all, Chapter 7 and Chapter 13 are the most used.

Here are some useful differences:

Chapter 7: removes nearly all of your debt, it applies to: credit card debt, unsecured debt, repossession balance, and some others. Your creditors won’t be bothering you anymore. In order to be able to apply for Chapter 7 bankruptcy you have to prove to the court that you do not have enough money to pay your debtors and your expenses.

Chapter 13: whoever has a monthly income can apply for this case. Creditors receive payments from a pre defined trustee where the debtor has made previous payments. When a person applies for Chapter 13 the bank takes care of the creditors and stops all collecting calls. This type of bankruptcy is applied for those who do not have enough monthly income or have already applied for Chapter 7 bankruptcy, within 6 years.

Effects of Bankruptcy
These are some secondary effects of filling bankruptcy:

1. After filing for bankruptcy, all of your possessions will be in charge of the trustee.
2. Your credit history will be damaged by bankruptcy; it will appear on your credit report for as long as 10 years.
3. The possibility of getting loans approved will be lowered, because all creditors will first check your credit report where the bankruptcy shows.

Everybody thinks that filing for bankruptcy is the best and more accurate solution for becoming a debt free person, but they are wrong, bankruptcy will degrade your social status, and all possible options to settle something will disappear, you will get stressed out; even, some operating cost can not be fixed by applying for bankruptcy.

Debt consolidation vs. Bankruptcy
1. Bankruptcy is known for being a momentary way out of your debt problems, on the other hand, debt consolidation is an everlasting solution that surely will make you debt free.
2. By choosing debt consolidation you will maintain your credit report clean; you will be able to reduce your debts making monthly, comfortable payments and you will not continue receiving calls from your creditors.
The decision is up to you, which way you will choose, but before making any sudden decisions remember to always receive guidance from professionals.

About the author:
Martin Rogers is a contributing writer to www.personal-bankruptcy-avoidance.com and is currently writing some special articles to orient business on how to manage debt and avoid bankruptcy. For Free Bankruptcy Information and Debt Help Consultation, call toll-free 1-877-850-3328