File Bankruptcy with the other One Million People this Year
Wondering if you should file bankruptcy? You're not alone. More than one million Americans file personal bankruptcy each year. However, the new bankruptcy laws instituted in 2005 have made filing bankruptcy considerably more difficult. If you plan to file, it is a good idea to make certain you understand the process.
In order to file bankruptcy, debtors must petition their local bankruptcy court. Although hiring a lawyer is not required, it is highly recommended. The Bankruptcy Abuse Prevention and Consumer Protection Act is exceptionally complicated. Few people possess the skills to adhere to provisions outlined in BAPCPA. Therefore, the first step in the bankruptcy process is to retain the services of a qualified bankruptcy attorney who is well-versed in BAPCPA laws.
The new bankruptcy laws require debtors to obtain credit counseling from an agency approved by the U.S. Trustee Program. Credit counseling must be obtained no more than six months prior to filing bankruptcy. Additionally, debtors must undergo the "means" test to determine if they are eligible to file bankruptcy.
There are two primary chapters of personal bankruptcy – Chapter 7 and Chapter 13. Chapter 7 required liquidation of assets to pay off outstanding debts. Whatever balance remains afterwards is discharged through the bankruptcy court.
Chapter 13 bankruptcy involves submission of a repayment plan. A bankruptcy judge will review the plan and either accept, reject or modify it. Upon approval, debtors are required to pay a substantial amount of their monthly income toward the repayment plan. If they are unable to make their payments, they fail out of bankruptcy. If this occurs, creditors can petition the court and request the bankruptcy be dismissed. Once a bankruptcy is dismissed, the debtor no longer has protection of bankruptcy laws and cannot file for bankruptcy protection for eight years.
Many people file Chapter 13 to avoid foreclosure. While it is true Chapter 13 bankruptcy can help homeowners stop foreclosure, if they are unable to adhere to the repayment plan and fail out of bankruptcy, their mortgage lender can request dismissal and begin foreclosure proceedings. When this occurs, homeowners can be forced out of their home in a matter of days.
Before making a decision to file bankruptcy, it is important to look at alternative solutions. These might include debt consolidation, debt settlement, credit counseling and budgeting. Credit is a valuable commodity and filing bankruptcy will have a detrimental effect on your credit report for up to ten years.
If bankruptcy alternatives do not provide the relief you are seeking and bankruptcy is your only option, take time to interview several attorneys. A good place to locate qualified bankruptcy lawyers is through the American Bar Association. Additionally, ask friends, co-workers or relatives for a referral. Chances are you know someone who has been through the process and can refer you to a reputable bankruptcy attorney.
Learn more about bankruptcy chapters, bankruptcy alternatives, debt consolidation, debt settlement, credit counseling and budgeting in our comprehensive article database. We offer a wide-range of articles to help you sort through your options and determine which action plan is best suited for you.