Introduction

Personal bankruptcy is a legal process where you surrender some of your assets, and in return your debts are discharged (which means written off or forgiven). Personal bankruptcy is also known as Chapter 7 personal bankruptcy. If one determines that personal bankruptcy is the best option available then one should learn more about the federal bankruptcy law. The most obvious advantage of filing personal bankruptcy is that most your debts are discharged, meaning you no longer have to pay them. One of the keys to determining which of the two types of personal bankruptcy is right for you is to understand the type of debt that you owe.

Income

Many families had problems with both medical bills and income loss. Presumably, such costs were often ruinous because of concomitant income loss or because the need for costly care persisted over several years. Finally, illness often leads to financial catastrophe through loss of income, as well as high medical bills. To qualify for a Chapter13 discharge, debtors (with the exception of stockbrokers and commoditybrokers, who are covered by separate provisions) must have a regular income,and their unsecured (such as credit card) and secured debts must totalless than $269,250 and $807,750, respectively.

Plan

Debtors filing for personal bankruptcy protection may do so under two types of structured plans, Chapter 7 or Chapter 13. Chapter 7 bankruptcy is a liquidation of assets while Chapter 13 bankruptcy is a reorganization where the debtor creates a three to five year payment plan. Under both plans, particular types of debt—such as government-backed student loans, child support and alimony payments, and recent income taxes—are ineligible for forgiveness and must be repaid. That's why we encourage you to explore all possible bankruptcy alternatives, including using a budget to repay your debts on your own, debt consolidation, credit counseling, Chapter 13 Wage Earner Plans, and consumer proposals.

Conclusion

If one determines that personal bankruptcy is the best option available then one should learn more about the federal bankruptcy law. Whether you file personal bankruptcy under Chapter 7 or Chapter 13 in the United States, or under the laws in the country where you live, personal bankruptcy is designed to discharge your debts. Researchers have found that the primary cause of personal bankruptcy is high levels of consumer debt often coupled with an unexpected insolvency event, such as the loss of a job, a major medical expense not covered by insurance, divorce or death of a spouse. Filing for personal bankruptcy is a serious event. When you are having trouble making ends meet and you have tried everything, it may be time to contact a bankruptcy attorney to see if personal bankruptcy is an option for you.