Personal bankruptcy, as opposed to business bankruptcy, allows individuals who are deep in debt and unable to pay their bills a chance to start over financially. For some people, filing a personal bankruptcy is an undesired but realistic choice when dealing with unmanageable financial problems. For others, it can cause serious and long-term damaging consequences. Thus, the decision to file for personal bankruptcy should be treated seriously, with your full understanding of both the negative and positive consequences. There are two main ways in which you can file for a personal bankruptcy. The first option is a Chapter 7 or “straight” bankruptcy, and it’s the fastest, simplest, and most frequently selected kind of bankruptcy. It involves selling your assets and using the proceeds to pay your creditors. If you successfully receive a discharge in a Chapter 7 bankruptcy, you’ll no longer be liable for paying your debts but the bankruptcy will remain on your credit report for 10 years. This type of bankruptcy is mainly geared towards individuals who are unable to pay any or all of their debts. If you can pay some or all of your debts but need more time to do so, a Chapter 13 or reorganization bankruptcy may better suit your needs as it allows you to commit to paying off your creditors partially over a three to five year period. This type of bankruptcy only stays on your credit report for seven years and it will allow you to keep most or all of your assets. Both types of bankruptcies will stop creditors from taking legal action against you for a period of time and will permit you to keep property deemed necessary for day-to-day living. Neither, however, will wipe out debts like child support, alimony, fines, recent taxes, and some student loans. The decision to file for personal bankruptcy, and under which chapter to do so, will largely depend on your individual circumstances. Sometimes, filing bankruptcy can provide much needed relief during extreme financial hardship. Other times, the negative impact on your credit and the prospect of losing valuable assets are too great to make bankruptcy a viable option. Either way, you’ll want to make sure your decision is well informed and that it appropriately fits your financial condition.
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