Voluntary bankruptcy is a legal proceeding that allows people overburdened with debt to remove it and start afresh. To be sure, bankruptcy is not to be understood as a simple way to remove your debts, but a voluntary bankruptcy does make it possible to start anew without the strain of financial troubles that are impossible to redress.
Voluntary bankruptcy and foreclosure
If in spite of all your efforts, you are way behind in payments and you have tried all other means to avoid foreclosure, voluntary bankruptcy can be the only solution.
Indeed, if you are at risk of foreclosure and/or are deep in debt, and you do not have any more options left, filing for bankruptcy may be the way you will have to go.
Consumers and homeowners can have an overload of debt due to many different grounds. Some familiar reasons for an excessive debt are credit cards, job redundancy, long illnesses and hospitalization, and spending more than you earn.
Filing for bankruptcy does not necessarily mean that you were careless with your finances. It means that your personal finances spiraled out of control and you are now facing an intolerable debt and perhaps bankruptcy and foreclosure.
When you are at risk of foreclosure and deep in debt you feel permanently stressed. Some people in these circumstances get so depressed that they do not dare to open the mailbox let alone the letters for fear of threatening notices or more bills they cannot pay.
The collections phone calls are unpleasant and often persistent. If you have high interest credit cards it can even appear that the more you pay the bigger your debt amount. It is impossible for you to get credit and there does not seem to be any light at the end of the tunnel. However, there is hope in the form of filing a voluntary bankruptcy.
Filing for bankruptcy
The aim of filing voluntary bankruptcy is to eliminate or largely reduce your debt and begin afresh. In other words, the main intent of filing voluntary bankruptcy is to start anew with a clean record.
When you are at risk of foreclosure and your debt has become unmanageable, it is very difficult to live normally. However, you should keep in mind that the purpose of bankruptcy can never be to elude your debts if you can honestly pay them off.
For this reason, the US Bankruptcy Court establishes a fair method of assigning certain amounts of money and specific properties to your creditors. This Bankruptcy Court decides what assets are to be sold to settle your debt and which ones you can keep. You might have to pay a part of your debt with cash on hand as well.
There are different bankruptcy types, which are known as chapters. Each bankruptcy chapter is designed to cope with different conditions and has therefore different bankruptcy rules. Generally speaking, an individual bankruptcy is either a chapter 7 bankruptcy or a chapter 13 bankruptcy.
In a chapter 7 bankruptcy, also called straight bankruptcy, the debtor’s assets are liquidated and used to pay off the debt. Any remaining debt is written off.
Another voluntary bankruptcy can be the chapter 13 bankruptcy where a legal court redesigns your debt into a more affordable repayment program.
In both bankruptcy types the court stops the collecting calls and you can breathe again. Actually, as soon as you inform the legal court that you are seeking bankruptcy, the collection attempts come to a halt.
Lawsuits, eviction threats, foreclosures, collectors of debt and possible repossessions, all are stopped. You can finally sigh with relief.
These two voluntary bankruptcy types are not the only bankruptcies. There is a chapter for companies, chapter 11, and another one for farmers, chapter 12. Chapter 11 and chapter 12 bankruptcy types are developed to eliminate corporation debts as opposed to consumer debt and debt related to a farm or farms.
Filing for bankruptcy is an extremely serious matter and not easy either. Voluntary bankruptcy is not to be taken lightly, and you should consult a bankruptcy attorney before taking any steps to file for voluntary bankruptcy on your own.