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by James H. Dimmitt
As credit card bills begin to stuff our mailboxes, many consumers are
faced with the hard reality that they went overboard with their
holiday shopping. And for those who don't pay the balance due in
full, you'll also wind up paying interest charges. For some people
this can be the beginning of the end as they can't see a way to manage
the burden of their credit card and other debts.
"Wipe the slate clean", "escape the pressure of credit card debt",
"call our bankruptcy hotline for an easy way out" the bankruptcy
lawyers proclaim in their slick television commercials. Last year 1.6
million people filed for bankruptcy in the U.S. Is bankruptcy the
right answer for your debt problems? Make sure you have the facts
before making a decision that has lingering effects.
A bankruptcy stays on your credit report for 10 years. You'll be able
to get credit in the future, but at higher interest rates, even after
your bankruptcy is completed.
A bankruptcy does not "wipe the slate clean" nor does it mean you are
totally debt-free. Alimony, child support, back taxes and most
student loans are not exempt from bankruptcy proceedings.
There are two basic types of personal bankruptcy: Chapter 7 and
Chapter 13. Both must be filed in a federal bankruptcy court. You
will have to pay about $160.00 in court fees. Attorney fees are
additional.
Chapter 7 bankruptcy involves the liquidation of all your assets that
are not exempt from the bankruptcy settlement. Exempt property may
include automobiles, some household furnishings, and property needed
for work-related use; for example if you were a mechanic the tools you
use to perform your work would be exempt from the bankruptcy
settlement. Exemption dollar amounts vary from state to state.
Under this plan the court appoints a trustee to handle the liquidation
of your nonexempt property. The trustee can sell or turn over your
property to your creditors if you have more than the allowed equity.
A Chapter 13 bankruptcy allows you to keep property, like a mortgaged
house (provided there are no liens on it) or a car, as long as you
have a steady income. A Chapter 13 bankruptcy is a court-ordered and
approved repayment plan to your creditors, usually over a 3-to-5 year
period without surrendering any property. However, any earned income
over the budgeted amount for basic maintenance will be distributed to
your creditors.
Financial experts agree that a bankruptcy should always be the last
resort used for managing your debts. An alternative to bankruptcy is
personal credit counseling. Call the Consumer Credit Counseling
Services at 800-388-2227 to find an office near you. A professional
counselor can help you decide the best way to handle your debt problems.
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http://www.yourfreecreditreportnow.comAuthor: James H. Dimmitt
James is editor of "TO YOUR CREDIT", a free weekly newsletter offering
money management news and tips. Subscribe to the newsletter by
visiting http://www.yourfreecreditreportnow.com.He is also author of "Identity Theft - How to Avoid Becoming the Next
Victim!" Details available at http://tinyurl.com/bc45
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