Informal Bankruptcy? Does It work?
There have been some media reports about informal bankruptcy recently that suggest that it might be a cheaper way to get out of debt. The only problem with that hypothesis is that you don’t really get out of debt through informal bankruptcy.
Informal bankruptcy is what happens when someone just decides that they will stop making payments on their unsecured debt. The only recourse the unsecured creditor will have is to send the person to collections, or obtain a judgement against them in state court.
Once the creditor has a judgement, a lien can be place on any property owned by the debtor. This could become a problem when you decide to sell a home, land or vehicle.
The creditor could also obtain a court order to seize your assets to settle the debt. Filing bankruptcy can stop unsecured creditors from coming after your home, car or other assets in order to collect on your debts.
Bankruptcy protections under Chapter 7 or Chapter 13 allow you to legally clear your debt, leaving your creditors with no claim on your income or assets.
Laws in some states protect the assets of a person, whether or not there is a formal declaration of bankruptcy in federal court. This usually makes the judgement unenforceable until the person’s death, when the estate would be responsible for the debt.
Taking legal action to clear your debt will protect you and your loved ones in the long run. Handling your financial problems in a legal and responsible way will insure that your assets are protected.
Contact a bankruptcy attorney for a free evaluation today to see if bankruptcy is right for you.
