How Bankruptcy Courts Help Individuals In Clearing Debt Burdens

Filing for bankruptcy involves a great deal of considerations before you can actually opt for it. It is an overly difficult and challenging decision to make for most people because of the complexities involved in bankruptcy laws. While on one hand it is believed by many that bankruptcy can only be a cause of loss for all parties involved, it is claimed on the other hand that it can be highly beneficial in clearing all your unsecured debts, thereby helping you in starting afresh. An experienced bankruptcy attorney can help appropriately in determining whether it is a favorable option for you. There are actually various forms of bankruptcy that be chosen from on the basis of individual financial situations and requirements.

Personal bankruptcy is an option made by bankruptcy courts for individuals trying to come out of a serious debt situation. It is a legal process of declaring insolvency, which is available only to individuals and not to organizations or traders. Personal bankruptcy filing can either be made willing by the debtors themselves, or can be forced on them by the creditors, who can submit petitions with the court for declaring them bankrupt. Personal bankruptcy can be used only for clearing unsecured debts such as unsecured loans, overdrafts, credit cards, unpaid tax and more. You’ll have to continue paying for certain debts like alimony and child support, back taxes, student loans, etc. Once the court accepts your petition, all your credit cards and bank accounts would be immediately closed down. Though this might be intimidating for most people, it should nevertheless be viewed as a good way to start afresh.

Bankruptcy courts have divided personal bankruptcy into two types to meet the requirements of all kinds of individuals under the debt burden. It is divided into chapter 7 bankruptcy and chapter 13 bankruptcy. Chapter 7 bankruptcy considered ideal for people having non-exempt assets in their possession, which can be taken over by the court for making payments to the creditors. However, interestingly, merely 5% of the individuals filing for this type bankruptcy have any non-exempt properties.

Chapter 13 bankruptcy, on the other hand is appropriate for individuals, who make a decent income despite suffering from severe debt burden. In this case, the court negotiates with the creditors in order to provide the individuals with easy repayment plan, enabling them to make easy monthly payments over a fixed period of time, only after they have taken care of all their necessary, monthly expenditures. Chapter 13 bankruptcy also helps in reducing the debt amount considerably.

One of the biggest advantages of personal bankruptcy is that, the moment your petition is accepted by the court, all the creditors and legally notified and instructed on cutting off all contacts with you. They are only allowed to communicate with the court for any possible issues and concerns. This is a great relief for the debtors, who were constantly harassed and bothered by the lenders prior to the bankruptcy filing. Following bankruptcy, the court takes care of all the issues related to debt payments and communication with the creditors.