Bankruptcy is a legal procedure, which offers an individual or business an opportunity to start fresh if they are unable to repay outstanding debts.  There are several chapters of bankruptcy in the Unites States, such as Chapters 7, 11 and 13, in which the Federal Court has jurisdiction. The process of bankruptcy allows people to liquidate assets or establish payment plans to pay their debts.  When to determine if filing for bankruptcy is necessary, is solely based on the circumstances of the specific individual or business.  The type of Chapter to file is determined by the decision for liquidation, reorganization or individual debt adjustment.

Calculating the budget of all monthly living expenses, excluding debt expenses, is the first step on deciding whether to file for bankruptcy.  If your budget does not allow you to pay your debt and live reasonably, you may have to file for bankruptcy.  If more than one payment was missed, debt collectors will begin to call in an attempt to collect the amount needed to pay the debt.  The calls can become overwhelming.  The feeling of intense stress and worry in not having the funds to pay the debts can be too much for one to take. These feelings can take over and cause a sense of shame and fear that could interfere with your daily life.

A great way to ease this stress is to talk to someone about what you are going through.  This is a positive activity to deal with the issues of debt.  Bankruptcy lawyers are not necessary to file but they are strongly suggested.   They will advise you whether to file for bankruptcy.  If the decision is made to file, the complexity of bankruptcy can be challenging for an individual.  Hiring a lawyer will ease you from the constant debt collector calls. Debt collectors must now call the lawyer instead of the individual.  As well as the lawyer assisting in the filing of bankruptcy, they will determine what chapter suits the individual’s criteria, as they are highly knowledgeable in the state’s laws and exemptions.

As mentioned earlier, there are multiple bankruptcy chapters an individual can file under.  Chapter 7 is the most common type because it liquidates assets from the debtor to pay the creditors.  Chapter 11 is for businesses or corporations who propose a plan of reorganization that if accepted by the creditors will become binding.  Chapter 13 is the most practical because it is a repayment plan for debtors that have regular income.

Rebuilding ones’ credit begins directly after filing for bankruptcy.  Many creditors will decline in offering unsecured credit cards when a bankruptcy appears on an individual’s credit report.  It will take up to ten years for the bankruptcy to be removed from the credit report.  For many people, bankruptcy can be the light at the end of the tunnel.  The opportunity to start fresh and rebuild credit makes the decision to file much easier.  It takes time and devotion to rebuild previously tarnished credit, but well worth it, over the stress of the inability to pay creditors.