Filing for bankruptcy may offer Generation Y members a means out of seemingly insurmountable personal debt, despite the fact that many might consider themselves too young to consider it.
What is insolvency?
Bankruptcy is the judicial determination of an individual or organization's (or """"debtor"""") inability to repay financial obligations. In an involuntary bankruptcy, creditors (e.g., banks, lending institutions) submit a bankruptcy petition against a debtor in an effort to recover owed funds. More prevalent are voluntary bankruptcies, in which debtors declare inability to pay debts.
Bankruptcy provides debtors experiencing financial hardship with a fresh start and aids creditors in the equitable collection of debts.
Insolvency categories and definitions
Chapter 7 or Chapter 13 of the United States Bankruptcy Code is typically chosen by individuals seeking to declare bankruptcy. Each has its own requirements and benefits, and an experienced bankruptcy attorney can assist you in determining which one is best.
Chapter 7 bankruptcy permits a debtor to liquidate his or her assets and property to satisfy debts. A court-appointed trustee is responsible for valuing and selling the debtor's assets, with the proceeds used to reduce the debtor's outstanding balance. The creditors absolve (or """"discharge"") any remaining debts.
A discharge in bankruptcy releases a debtor from personal liability for certain categories of debts. On any remaining balances, creditors may no longer engage in additional debt collection efforts (such as phone calls and letters).
Chapter 13 permits a debtor to restructure his or her debt, allowing the debtor to retain some or all of his or her property and assets. Also known as a ""wage earners plan,"" this court-approved repayment plan allows employed debtors to repay all or a portion of their accumulated debt.
Student loans are non-dischargeable in bankruptcy, which means they cannot be eliminated completely by filing for bankruptcy. However, they can be consolidated under Chapter 13.
Should I File for Chapter 7?
The decision to declare bankruptcy can be challenging. There are numerous factors a debtor should discuss with an attorney before filing for bankruptcy, as no two cases are identical.
If you answered ""yes"" to one or more of the following, you may qualify for bankruptcy:
You regularly receive phone calls and mail from creditors regarding delayed and overdue payments.
You suffered a measurable financial setback (i.e. unemployment, divorce, disability, illness)
You can only afford to pay the bare minimum on your outstanding obligations.
An experienced bankruptcy attorney can provide you with more information about whether filing for bankruptcy is the right decision for you and what alternatives you may have. If you or a loved one is experiencing financial difficulties, contact a bankruptcy attorney immediately.""
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