Declaring Personal Bankruptcy by Samantha Bainer

If youre drowning in debt and creditors have your phone ringing off the hook, personal bankruptcy might seem the only way out. Indeed, for people whose debts dwarf their ability to pay, declaring bankruptcy can be a fast way to gain a fresh financial start. There are two types of bankruptcy petitions you can file: Chapter 7 and Chapter 13. Each of these have a different purpose and different set of circumstances attached. Property exempt from liquidation during a Chapter 7 bankruptcy includes vehicles worth less than $1500, clothing, tools of your trade, most household furnishing and goods and some jewelry. You may also retain up to $18,450 worth of equity in your home. Though declaring a Chapter 7 bankruptcy will discharge you from most of your debts, there are certain debts that are not covered. These include child support or alimony payments, most student loans, recent tax bills or debts owed to creditors with whom youve been dishonest in the past. Chapter 13 bankruptcy serves not to discharge you from your debts but rather to reorganize them and repay them within three to five years. This option is preferable for people with property and assets they want to keep and/or a predictable source of income allowing them to repay their debts and maintain a standard of living. This type of bankruptcy allows the debtor to keep their property and file a repayment schedule with the court. If you file for Chapter 7 bankruptcy but a judge deems you fit to pay, you may be forced to re-file under Chapter 13. This could happen for any number of reasons, from assessment of your income to the value of your property. Your Chapter 7 bankruptcy petition may be denied if a judge deems you fit to pay, in which case you may re-file a Chapter 13 bankruptcy petition. A Chapter 13 does not discharge you of your debts, but rather reorganizes them through the enactment of a court ordered repayment schedule where you repay your creditors over a period of three to five years. Chapter 13 bankruptcy is the preferred option for people who wish to retain control of their assets and/or have a reliable and prolonged source of income. No matter how you slice it, filing for bankruptcy will do damage to your credit rating. However, most people who file for bankruptcy already have poor credit ratings that are unlikely to get much worse from declaring bankruptcy. Your bankruptcy will be listed in your credit report for ten years after the date of filing. Ultimately, the opportunity to make a fresh start by wiping out existing debts and rebuilding credit is often preferable. Before making the decision to file for bankruptcy, it is a good idea to talk with a lawyer, financial advisor or credit counselor to ensure you are making the right decision for your long-term financial future. Samantha Bainer runs and looks after Aol Bankruptcy excellent resource for bankruptcy articles For more information go to: http://www.aolbankruptcy.com/