The Last Debt Solution Should Be Bankruptcy
A debt solution like bankruptcy should really only be used as a last
possible solution. The problem with this solution of debt problems is that
it includes a lot more than simply eliminating debt. When someone declares
them self bankrupted, all debt collection actions against that person are
prevented. The court grants an "automatic stay", which - with a few
exceptions means that creditors cannot come after the money owed to them.
The most important exception is that when a loan is secured by property
creditors can seek relief from the stay and seize that property. The other
exceptions are student loan debt, alimony, child support and taxes. The
backside for the person who seeks this solution to eliminate his debt is
that he or she must hand over all non-exempt property. This property is
then sold and the proceeds are distributed amongst the creditors.
There are two types of this solution of your debt problems:.
Chapter 7
which states that a person is required to hand over much of their
property, but creditors cannot seek damages from further income.
Chapter 13
allows a person to keep most of their income, but have to make a plan to
pay the debt back to creditors based on their future income. Under this
plan, the court can require individuals to live within a very strict
budget.
As you see, there are downsides to both debt elimination plans. One of the
biggest downside is that both debt erase plans will significantly impact a
person's credit rate. For this reason, declaring yourself bankrupt is a
solution of your debt problems that should be evaluated very thoroughly
and carefully. Other debt solutions like debt negotiation, debt
counselling and debt consolidation should definitely be considered first.
Terje Brooks Ellingsen is a writer and internet publisher. He runs the
website 1st-In-Loan.net Terje gives advice and helps people with personal
financial issues like debt aid and debt consolidation loans.
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