Bankruptcy

First, let me say this is for informational purposes only and you should seek legal advice.  Okay, with that out of the way, there are different types of bankruptcies an individual could file.  Understand once you start the process and it is sent to the courts you no longer have any control of the process, meaning you will not be able to stop it.  The decision will be up to the court at that point.  You give the courts and your creditors the right to make you sell off your possessions in order to pay your debt obligations and potentially seize your income tax, if you file after the bankruptcy and receive a return.  That is a reason for some of the estate sales you see. A lawyer can give you the specifics, but this is the basic of what can transpire during a bankruptcy.  The courts will say what is allowed or disallowed.  Due to the new rules there are financial requirements for either filing and how often you can file, so you only want to use this when necessary.  

Filing Chapter 7 has the power to relieve you of all the debt you have listed.  You may be allowed to keep your car, home, and other items as long as they are not more than what you are exempt for.  A Chapter 7 will usually last about four to six months prior to being discharged.  A Chapter 13 is the reorganization of debt, meaning you will be responsible to make payments toward the debt and it can be up to three to five years to be discharged.  Generally unsecured creditors will receive a lesser amount than what is actually owed.

If you keep your home or car you will have to continue to pay the note or the creditor can request a relief of stay and have it included in the bankruptcy.  Bankruptcy will only protect your home if you continue to pay the mortgage, due to it only places the arrears under the payment arrangement.  If you are not paying the front end of your mortgage then you will continue to fall behind.  So, understand a chapter 13 will only help you keep your home if you can pay your current mortgage.  It will only buy you time to get things figured out or replace your income, if you are not able to pay them both simultaneously.  Lenders will not be able to negotiate with you concerning a debt until you have been discharged.  That is the reason the bank will not speak with you during a bankruptcy or review your file until you have been discharged or dismissed.  The same rules apply for your vehicle as well.  The trustee will be responsible for setting the amount for repayment in the Chapter 13 plan and the length of time for the repayment period.  

It doesn't matter which one you file, they are reflected the same way on your credit report.  It will remain on your credit report for 10 years.  It will be up to the lenders if they will consider you made arrangements to pay your debtors, but you will still have the scar.  You want to only file bankruptcy when there is nothing more you can do and speak with a bankruptcy attorney for your best option.  Remember to do your homework as well, so you have some thoughts about the process so it doesn't seem so foreign to you.  The good news is once your case has been discharged your creditors listed can no longer contact you concerning the debt.  But if your file is dismissed then there is an issue which needs to be addressed or you didn't make the scheduled payments to the trustee.  Either reason puts you bank on their radar.  I hope this provided a snap shot for this process and helps your toward the best financial decision for you and your family.