Bankruptcy is a program that gives consumers a second chance. Once a person begins to miss payments, it often becomes a never ending cycle. You are constantly trying to catch up and instead of making progress on your missed and late payments, you are getting deeper and deeper into debt. Bankruptcy recognizes that sometimes, depending on their situation, people deserve a second chance. How exactly does bankruptcy work?
Who qualifies for bankruptcy?
Bankruptcy is usually granted to those who are struggling financially because of an economic hardship. This might be a person who worked for many years and then lost their job, thus finding it difficult to make their payments. It also might be granted to a business owner who is no longer turning a profit. Each bankruptcy case is different and contains entirely different specifics. For this reason, the bankruptcy often must be heard in front of a bankruptcy judge. Hiring a legal representative to present your bankruptcy case is important in increasing your chances of being granted the bankruptcy.
Will all of my debt be cancelled?
A lot of consumers mistakenly believe that if they are granted bankruptcy that all of their debt will be forgiven. This is usually not the case. While Chapter 13 bankruptcy cases were once common, they were frequently misused. This ended up causing a strain on the U.S. economy, because so much of owed debt was completely forgiven. However, there is another type of bankruptcy, called Chapter 7 bankruptcy. While it does not entirely erase all of your debt, it does compile it into a much more affordable monthly payment. Regardless of the type of bankruptcy chapter that you choose, your chances of being granted one is increased with bankruptcy legal representation.
What is the difference between the chapters in bankruptcy?
The two types of bankruptcy chapters are Chapter 13 and Chapter 7. Each bankruptcy chapter has different terms, acceptance rates, and costs to file. For example, with a bankruptcy legal representative, the success rate for Chapter 7 bankruptcy claims is over 95% (vs. 60% pro se) and the success rate for Chapter 13 is 55% (vs. .04% pro se). Bankruptcy filers must also pay a filing fee. For a Chapter 7 case, the fee is $335. For a Chapter 13 case, the fee is $310. These fees can be a lot for filers, as they are already struggling financially. For this reason, hiring a legal representative on the first filing is important to prevent having to double file.
The Chapter 7 bankruptcy rolls all of the debt into one single payment. The trustee or bankruptcy holder will collect the payment and then issue appropriate amounts to your lenders. If you miss a payment, you can lose your eligibility in Chapter 7. One of the best parts of this type of bankruptcy is that it can prevent you from losing your home or vehicle due to missed payments. The Chapter 13 bankruptcy, now more difficult to be granted, wipes away most of the debt, not including student loans or medical bills.
How common are bankruptcy filings?
The frequency of bankruptcy filings varies year by year. In times of poor economic growth, there are likely to be an increase in both personal and business bankruptcy cases. There also seems to be specific states that have higher than average bankruptcy filings and employed bankruptcy lawyers. The top 5 states with the most bankruptcy filings in 2014 are (in order from most), California, Florida, Illinois, Georgia, and Ohio. This could be due to the fact that the economy is not ass successful in these states or that there is a higher unemployment rate.
Bankruptcy is a common government program that gives those in debt a second chance. Otherwise, the financial burden could make it impossible to ever recovery from one job loss or poor financial decision. There are two common types of bankruptcy filings. It is important to work with a bankruptcy legal representative to ensure that you are filing correctly and that you have the best chances at being granted the right bankruptcy chapter for your needs.