Federal laws designate specific rules that must be followed to be able to file bankruptcy. Although these rules are a large part of the criteria you must meet, there are also state laws that add more criteria. Bankruptcies are not to be entered into lightly, so it’s important that you understand the differences and file under the appropriate chapter that applies to your specific circumstances.

However, there is still a good side on bankruptcy. This is one way of cutting off the unending phone calls and demand lenders from lending companies. Collection agents would no longer have to waste their time going after you once you have declared bankruptcy. But you also have to put in mind that the effects of the said option would rely on its kind.

When you talk of Chapter 13 bankruptcy or known as reorganization, this will allow you to take hold of some of your assets such as car or the house or you may either lose them. This option will allow you to settle your pass due accounts in a given period of time such as 3 or 5 years instead of giving up your house.

Chapter Thirteen bankruptcies are sometimes confused with a Chapter Seven. Under a Chapter Thirteen, debt claimed is not discharged. Instead, it restructures the debts, combining them into payments that are based on the filer’s income. You don’t have to surrender your assets. The court will determine, again based on income, the time you have to repay your debt. After you have completed your repayment plan, within either three or five years, your debt is then discharged.

There is also a chapter that is specifically designated for farmers and fishermen who use these means to support their family. In order to qualify for this chapter as a business, your company must be owned by a single family unit. For individuals, you must verify your occupation. Your total debt must not exceed certain limits and the ability to repay debts must be proven.

Anyone attending counselling must bring with them details of their income and assets, and their financial outgoings. They must also supply details of their creditors and amounts owed. This way the court can decide if the more popular chapter 7 bankruptcy is an option, or if in fact the debtor, albeit with a rearrangement of their debts under a chapter 13 bankruptcy, can afford to repay their debts over a period of time, usually 3-5 years. In this way the debtor does not escape the bulk of debt, and creditors get their money.

It will also determine if there are perhaps other ways the debtor could avoid bankruptcy altogether. One way is by using debt settlement companies, who charge a fee to the debtor, but take over the debt, usually at a reduced amount which they negotiate on your behalf.

The advantage with these companies is that your credit record is nowhere near as badly affected as it is should you become a bankrupt. However, care must be taken when using one of these companies as many have turned out to be scams, taking the debtor’s cash, but not dealing with the debt itself, leaving the debtor worse off.

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