What is Bankruptcy?

What is Bankruptcy? We Offer a Bankruptcy Alternative

What is bankruptcyDISCLAIMER: We are not lawyers and are not giving legal advice. Before filing, talk to a lawyer in your state. 

What is bankruptcy? Today, more than ever, people are filing personal bankruptcy as a way to get away from the burden of their debt. Statistics show that the number one reason people file for bankruptcy is the harassment and pressure from companies trying to recover their money. For some people, it’s the only realistic option among all the available debt solutions. For example, if you owe $60,000 and you will never make more than $1,000 in any given month, then bankruptcy is the only option. The biggest benefit of it is that it provides immediate relief and puts an immediate stop to the harassment. In some cases, all of your unsecured debt is forgiven, and you get a “clean slate”.

New laws make it considerably harder and less desirable to file for bankruptcy as a way out. Even if you are able to file for bankruptcy, there is a good chance you will still have to pay some or all your debts over a period of time. To determine what type of bankruptcy you may qualify for, Pacific Debt Inc. strongly encourages you to speak with an attorney in your state. A licensed attorney in your state can review what debt help and debt solutions are available to you through bankruptcy. Some attorneys may also offer other alternatives as well.

The negative aspect of bankruptcy is the effect on your credit rating. It will stay on your credit report for up to 10 years. In addition, you’ll pay higher interest rates for future important purchases. For example, if you want to purchase a house after bankruptcy, the interest rate will be much higher than the average consumer who never has filed for bankruptcy. In addition, bankruptcy may be considered when applying for a job, insurance policy, or car loan or filling out a renter’s application. As you can see, bankruptcy isn’t as appealing as it may first appear, although, in some circumstances, it is the best, if not only, solution. Only a licensed attorney can provide debt help guidance and discuss bankruptcy as a suitable option for you.

Pacific Debt has helped thousands of people reduce their debt. Since 2002we’ve settled over $300 million in debt for our clients. We can help settle your debts on your behalf so you can continue with your everyday life. Our goal is to save you some cash so you have extra money to afford the things you need. Contact us today to see how we can help. Pacific Debt offers debt settlement in the form of debt settlement, which is considered to be an alternative to bankruptcy.

What is Bankruptcy?

Bankruptcy is a legal action that turns your assets into cash and uses that to pay off your creditors. It is basically a reorganization, or liquidation, of your assets. Some of us might face BK at some point in our lives. A lot of people are one life event – a health issue, unemployment, divorce, lawsuit — away from bankruptcy.

Bankruptcy is designed for desperate consumers who are unable to pay their bills and need to be released from existing debts immediately or restructure it for repayment. It allows the consumer to start over financially.

What Are The Different Types of Bankruptcy?

Once you decide that bankruptcy is the right choice, you must decide which type to file.

The type of bankruptcy depends on whether you file as an individual or as a business owner. You also need to know your state’s bankruptcy laws and requirements.

Find out more information about how bankruptcy works here.

  • What is Chapter 7 Bankruptcy?

Chapter 7 is designed for individuals. Only a specific amount of debt can be restructured.

To qualify for a Chapter 7, you must earn less than your state’s median. You will have to show your financial records for a “means test.”

In general, credit cards, foreclosure, medical bills, repossession, and utility debts are eligible for Chapter 7.

  • What is Chapter 11 Bankruptcy?

A Chapter 11 bankruptcy allows individuals or businesses to restructure and reorganize debts. Chapter 11 bankruptcy doesn’t limit the amount of debt to be restructured.

  • What is Chapter 12 Bankruptcy?

A Chapter 12 bankruptcy is designed mainly for family farmers or fishermen to reorganize finances and debts and stay in business.

  • What is Chapter 13 Bankruptcy?

A Chapter 13 bankruptcy is for individuals who have assets and make money but want their debt restructured.

The Bankruptcy Process

The bankruptcy process is fairly straightforward. You’ll spend a lot of time filling out documents and legal forms. You’ll need to list all assets, all debts, and all income.

You’ll also attend a meeting of creditors and a court hearing. It typically takes four to six months for your case to be finalized and closed.

A Debt Specialist can help you understand how to avoid bankruptcy with our Debt Settlement Program

Get your Free Debt Settlement Consultation from Pacific Debt Inc

The Pros and Cons of Bankruptcy

Typically, you want to hire a lawyer in your state when you are considering filing. There are clear pros and cons with bankruptcy, so go over your options carefully with an attorney.

Some bankruptcy pros and cons are listed below.

Pros of Bankruptcy

  • Stops Bill Collections – No more collection calls and letters.
  • Eliminates Credit Card Debt – Depending on the BK you file, and the type of debt you have, all your debts might get wiped away.
  • Allows the opportunity to start rebuilding your credit – Enjoy a fresh financial start!

Cons of Bankruptcy

  • Damaging to your Credit – It stays on your credit report for 7-10 years depending on the type of bankruptcy that was filed.
  • Cost of Filing and Lawyers – Bankruptcy can be expensive. There are filing fees, and lawyers can cost thousands of dollars. Make sure to check all your options carefully.
  • Physical and Mental Drain – Until your bankruptcy is finalized, you could still get creditors’ harassing phone calls and threatening legal letters. Many people agonize over the stigma of bankruptcy.
  • New Credit and Loans – Your credit will probably take a severe hit. You will, at some point, need to start rebuilding your credit. It’s very difficult(but not impossible) to get approved for new loans with a bankruptcy on your credit history.

Alternatives to Bankruptcy

Bankruptcy is typically a last resort. Explore all your options before filing for bankruptcy. You may want to file if all your alternatives fail. Here are some alternatives to consider first.

  • Contact Your Creditors and try to work out an installment or repayment plan. Chances are your creditors will work with you.
  • Consider Credit / Debt Counseling to help you negotiate with your creditors. A good credit/debt counselor will help you negotiate lower interest rates and smaller payments, and work out an installment plan to pay back your debts.
  • A Debt Consolidation Loan may be a viable option. A debt consolidation loan allows you to pay off your creditors. You’ll then have to repay the loan.
  • Check Out Debt Settlement Options. With debt settlement, you may be able to get a more affordable payment. Get a Free Debt Settlement Consultation from Pacific Debt Inc
  • Sell Your Valuables and pay your bills. This is known as liquidation. If you’re in dire need of cash, liquidate anything you can. Your car, expensive jewelry, stocks, bitcoin, etc. will fetch good money to help pay your debts.
  • Ignore it all and do nothing. If you have no assets and are taken to court by your creditors, a legal judgment against you means nothing. It’s against the law for creditors to come after basic necessities like clothing, food, furniture — what you need to survive. This is a risky option! Seek legal counsel before taking ANY option.

Pacific Debt Inc can help you avoid bankruptcy from their Debt Settlement Program. Stop drowning in debt and explore your debt settlement options today. If you are unsure on what to do next, visit our debt relief page and click on your state to get started.

Debt Consolidation vs Bankruptcy

If you are strongly considering bankruptcy, you’re probably pretty stressed out! Before you take that final step, look at the pros and cons of debt consolidation.

Pros of Debt Consolidation

  • Not public domain or public information. Bankruptcy becomes part of your credit report for up to ten years.
  • Merges all outstanding debts into one single monthly payment. This is a great method to manage all those monthly payments. A bankruptcy erases debt, depending on which type you have.

Cons of Debt Consolidation

  • Secured loans. You’ll have to put up collateral, like your house, in exchange for a lower monthly interest rate. If you default on your loan, the creditor can come after your house.
  • Very large debt can be difficult to pay off. Bankruptcy might be a better option if you have a lot of debt, no assets, and do not intend to apply for a loan anytime soon.
  • Bad credit score – since this happens with both debt consolidation and bankruptcy, talk to a legal specialist to examine all your available options.

How to File Bankruptcy Yourself

Bankruptcy can be very expensive. The most expensive part is your legal expenses. Many people file for bankruptcy on their own because of that. It is a bit complicated, so follow the steps below to help streamline the bankruptcy process. If you find this process overwhelming, consider using an attorney in your state who specializes in bankruptcy.

  1. File your Means Test. This is a test to determine eligibility for the bankruptcy.
  2. Request your credit report from all the major credit bureaus. You need all of them because creditors do not report to all the bureaus.
    1. Equifax 1-800-685-1111
    2. Experian 1-888-EXPERIAN (397-3742)
    3. TransUnion 1-800-916-8800
    4. PMBC/Microbilt 1-888-222-7621
    5. SageStream 1-888-395-0277 (Option 1)
  3. Fill out all necessary paperwork. You can download these forms. The following is a list of all forms that may be required. Pick the forms needed for your individual case. Your specific state will have additional paperwork.
    1. B 101 Voluntary Petition for Individuals Filing for Bankruptcy
    2. B 101A Initial Statement About an Eviction Judgment Against You (if you have eviction judgment)
    3. B 101B Statement About Payment of an Eviction Judgment Against You (if you have eviction judgment)
    4. B 103A Application for Individuals to Pay the Filing Fee in Installments
    5. B 103B Application to Have Chapter 7 Filing Fee Waived
    6. B 106 Summary of Your Assets and Liabilities and Certain Statistical Information
    7. B 106A/B Schedule A/B: Property
    8. B 106C Schedule C: The Property You Claim as Exempt
    9. B 106D Schedule D: Creditors Who Hold Claims Secured by Property
    10. B 106E/F Schedule E/F: Creditors Who Have Unsecured Claims
    11. B 106G Schedule G: Executory Contracts and Unexpired Leases
    12. B 106H Schedule H: Your Codebtors
    13. B 106I Schedule I: Your Income
    14. B 106J Schedule J: Your Expenses
    15. B 106J-2 Schedule J-2: Expenses for Separate Household of Debtor 2
    16. B 107 Your Statement of Financial Affairs for individuals Filing Bankruptcy
    17. B 108 Statement of Intention for Individuals Filing Under Chapter 7
    18. B 121 Your Statement About Your Social Security Numbers
    19. B 122A-1 Chapter 7 Statement of Current Monthly Income
    20. B 122A-1 Supp Statement of Exemption from Presumption of Abuse (only if you qualify)
    21. B 122A-2 Chapter 7 Means Test Calculation (if your income is above your state median)
  4. Attend a meeting of creditors. Your creditors won’t be there. Answer all questions to the best of your knowledge.
  5. Complete a financial management course.

If you’d like to find out more information on Bankruptcy, check out our article on The Top Ten Most Common Bankruptcy Questions. You should also contact a lawyer in your state to go over your options.


Before you file for bankruptcy, look at all your available options. It is not a step to take lightly! It is expensive and time-consuming, most people hire a lawyer to file a BK.

We strongly encourage you to talk with a lawyer in your area BEFORE you make any decisions.

Pacific Debt has helped thousands of people reduce their debt. Since 2002, we’ve settled over $200 million in debt for our clients. Contact us today to see how we can help.

We are not lawyers and we are not giving legal advice. These are merely some bankruptcy options. Consult an attorney who specializes in bankruptcy law BEFORE you do anything.

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