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File Bankruptcy

In order to file bankruptcy debtors must follow established protocol set forth in the U.S. Bankruptcy Code. In 2005, Congress enacted new bankruptcy laws, making it much more difficult to file. Few people can undergo the process alone and will require the services of an attorney.

When people file bankruptcy they must undergo the 'means' test; a financial tool that determines how much debt must be repaid. The Bankruptcy Abuse Prevention and Consumer Protection Act require debtors must repay a portion of debts unless they earn less than their states' median income level.

Most debtors are required to establish a repayment plan under Chapter 13. Also known as 'reorganization', Chapter 13 lets debtors retain assets such as houses and automobiles. Chapter 13 payments are usually paid over a period of three to five years.

During this time, debtors must adhere to their repayment plan or face failing out of bankruptcy. If debtors fail out of bankruptcy, creditors can petition the court and request dismissal. If a judge grants dismissal, creditors can move forward with collection actions.

This is of particular importance to individuals who file bankruptcy to stop foreclosure. Many homeowners are under the false belief bankruptcy is the cure for saving their home.

It is important to realize that in addition to paying regular mortgage payments, debtors must also repay delinquent amounts through the repayment plan. This can be very difficult for individuals already struggling to make ends meet.

If homeowner's lose bankruptcy protection, mortgage lenders can initiate foreclosure action at the point where they left off. If the home was scheduled for foreclosure one week before bankruptcy was filed, the lender can reignite the process at that point.

Consider looking into bankruptcy alternatives before making a final decision. Alternatives can include credit counseling, debt consolidation, debt settlement or budgeting. Each option offers pros and cons and all will adversely affect credit ratings.

Bankruptcy remains on credit reports for up to ten years. Debt consolidation and debt settlement hang around for seven years. Credit counseling is required when filing bankruptcy. Individuals considering bankruptcy should obtain credit counseling from an approved agency associated with the U.S. Trustee Program.

Unless you have an unlimited supply of money, budgeting is a necessary skill. While this action might not be sufficient to avoid bankruptcy, it must be mastered in order to prevent bankruptcy from occurring in the future. Unfortunately, millions of Americans have yet to understand the fundamentals of creating a household budget.

Our bankruptcy articles library is packed with personal money management articles. Each article offers tips and resources to help build or restore credit and start planning for financial success.

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Published on May 28, 2009 at 01:41 AM | Comments: 2

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This is quite helpful and I will see that I can implement that. I really hope that this will save my home.

Andrea | June 6, 2009 10:41 AM


Really nice post. Thanks a lot for sharing these information. I have to say that I really learned a lot from reading all your articles. You are helping a lot of people by posting great information.

foreclosure help | June 21, 2009 6:13 AM


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