It used to be that once someone found themselves drowning in debt, they would have to give up all they had to pay off those debts. Even their homes would be put at risk and the shame of having to give up what was worked so hard for was enough for anyone to give up the ghost completely. However, these days, there are some remedies which can be taken advantage of before resorting to this level. This is where a bankruptcy attorney will be able to advice on the next move. A bankruptcy lawyer will be able to work through all the necessary paperwork so that the beleaguered debtor may come out of the mess with some things still intact.
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Of course, if the debt is mainly credit card based, there is certainly a remedy through the court which can actually wipe it out completely as long as certain criteria are met. The court will order some kind of means test where certain expenses are allowed. Those which do not meet these criteria are not allowed and the court will then look at the income coming into the house.
If the income is less than the expenses, all the credit card debt is wiped out completely. This gives the householder the breathing space that they need to get back on their feet and also stops the creditors from harassing them unduly. This is called filing for Chapter 7.
On the other hand, filing for Chapter 13 is a little different. The same means test is ordered but if the income is more than the expenses, all the debt is rolled into one figure and a payment plan which is achievable is worked out. This has to be paid over a certain period until either that time runs out or the debt is paid. The good thing about this way is that the debtor will no longer have any harassing calls or letters sent to him. He will not have to pay any penalty payments on the whole amount or, indeed, no credit charges will be added to the whole amount from the date the court decides the case.
Although this may sound like an easy way out for the debtor, he does have to undergo some rather demeaning examinations to his financial status. He can only avail himself of this service once in every seven years or so and this will also probably mean that his credit rating will be affected adversely.
On the other hand, this is better than having to sell up his home or valued belongings merely because he has come unstuck for some reason or other. The government has brought in these chapters so that people would not be thrown out of their homes or have the houses repossessed merely because they did not foresee the downturn in the economic climate that affected the whole world in the last few years.
This beats the way that things used to be handled some years ago when people had no recourse in the courts at all.
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