Filing for bankruptcy is a serious financial decision and should not be taken lightly, says Vivix Credit Solutions. A person is financially bankrupt when he cannot repay debts owed to his creditors.  Bankruptcy is a process whereby a person can either eliminate or repay a portion of all of his debts under the protection of the federal bankruptcy court.  There are two main bankruptcy types available to consumers:  Chapter 7 and Chapter 13.  Chapter 7 is a liquidation bankruptcy:  a trustee of the court will liquidate a person’s assets and use them to pay back some or all of the debt.  Chapter 13 is not a liquidation:  you may get to keep your assets, but the court will figure out a payment plan so you can repay your debt within three to five years.

Vivix Credit Solutions:

1) Do you have a sufficient disposable income to fund a repayment plan?  If so, the court will instead force you to consider Chapter 13.

2) What kind of assets do you hold? If your assets are mainly secured debt (ie – a car or a house), you can negotiate a payment plan with your court or have certain types of secured debt eliminated in Chapter 7 bankruptcy.  You will, however, not get to keep all your assets.  Certain assets are exempt, like a car and household items.

3) What type of debt do you owe?  Keep in mind that certain types of debt, such as child support, alimony, student loans and tax debt cannot be eliminated with bankruptcy.  Chapter 7 is ideal for wiping out credit card debt and other types of unsecured debts notes Vivix Credit Solutions.

1) Do you have a steady source of income that can be used to pay down your debt?  The court will structure a repayment plan and while the terms can vary, you should be able to make payments over time that will enable you to keep secured debt items (like your car).  You will have to make payments, over time, to bring the accounts current.

2) Is your house about to be foreclosed upon?  If so, you will want to consider Chapter 13.  Because Chapter 13 enables you to structure a debt repayment plan, the lender must accept a plan to let you make up your missed payments.  Again, this is only possible if you have a steady, adequate income, says Vivix Credit Solutions.

Filing for bankruptcy will negatively affect your credit score for years and will make obtaining new credit difficult and more expensive.  A bankruptcy filing will stay on your credit report for seven years.  However, when calamity strikes, such as unemployment or large medical bills, bankruptcy may be your only option, notes Vivix Credit Solutions.