BANKRUPTCY

Have you reached the maximum on your credit cards? Do you struggle to make the minimum payment each month? Have you started to use your savings to pay off your debts? Have creditors begun their nagging and annoying phone calls? Maybe you are considering filing bankruptcy?

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Bankruptcy means hiring an attorney to file with the federal court for the government to step in and discharge your debts. There are 3 types of bankruptcy:

Chapter 7 - This is the most common type filed and asks the court to discharge the most debts owed. Often non-exempt property is sold to repay part of the debt. The remaining debt is written off and does not have to be repaid. However, the recent changes in bankruptcy law have limited who can file this type of bankruptcy. The court is denying this option if you have any assets or ability to pay even a partial amount of your debts.

Chapter 11 - Is rarely available to individual consumers. This is often filed by companies and requires a repayment plan be submitted and approved by the creditors and the court.

Chapter 13 - This also requires a repayment plan be submitted and approved by the creditors and the court. The payments are then made to a mediator designated by the court and the mediator then pays the creditors.

Some people believe that the negative stigma about having to file bankruptcy is being whitewashed because so many people are filing each year. However, bankruptcy follows you for 8-10 years. It is always better to repay your debts than filing bankruptcy because new creditors are more apt to grant credit and grant it sooner. In addition, filing bankruptcy is also costly. Some bankruptcy lawyers today state that the starting cost to file Chapter 7 is $100.00. That doesn't tell you how high the attorney's costs can go, or the court costs. There are times when you must appear in court, which means you will probably have to take unpaid time off work. This money is not paying off your debt, but adding to it.

Maybe a better option would be to reduce the amount of your debt and provide you with cash to pay off any remaining debt. This would allow you to regroup and build up your savings so you are in the best position to reach your dream.