Believe it or not, the bankruptcy laws are there for your protection. The old days of companies, particularly credit card companies, rewarding people for loyalty have long gone and in the current economic climate financial institutions generally have only one interest – their bottom line. Declaring yourself bankrupt offers a way out.
However, before declaring yourself bankrupt, you should examine every possible alternative avenue. Bankruptcy stays on your credit report for up to ten years, and under the Bankruptcy Abuse Prevention and Consumer Protection Act, 2005 (“BAPCPA”) it is now law that anyone filing for bankruptcy must, within 180 days of filing, attend US Trustee approved consumer credit counselling to ensure that all alternatives are explored.
If, after counselling, it is decided that bankruptcy is the only way forward, certain decisions have to be made.
Firstly, you have to decide which type of bankruptcy you are going to file under, the two most common being chapter 7 and chapter 13. Chapter 7 is often seen as the preferred option, but under the new BAPCPA rules, all applicants for bankruptcy have to undergo a means test, the result of which often forces individuals into chapter 13.
Next thing is to think about whether or not you employ the services of a lawyer. I would strongly suggest you do. This is your financial future at stake and you should have the best legal representation you can afford.
Thirdly, your application for bankruptcy can be quashed if you use your credit cards after filing for bankruptcy, due to the fact that you are running up credit that by definition (bankruptcy) you know you can’t repay.
When your lawyer files your case your creditors are subject to “automatic stay”. This means they can no longer chase you for payment. Instead they have to deal with your lawyer directly.
Shortly after filing, you will be notified by mail (usually) of a “341 meeting”. This is from section 341 of the bancruptcy code and is also called a creditors meeting. Here you submit details of income and expenditure, as well as a list of creditors. You are then asked a series of questions under oath, so that the court is satisfied that you are indeed in the precarious financial situation you claim.
The trustee then arranges liquidation of your assets with the proceeds used to pay off as much debt as possible. Once this has been done you are no longer liable for any debt left over. Approximately 60 days later you will receive notice of discharge. This is the case for a chapter 7 bankruptcy.
Chapter 13 works differently to 7 in that no assets are sold. A repayment plan is drawn up, the terms of which are determined by means test and can be harsh, to repay all your creditors over a 3 – 5 year period. The bankruptcy is discharged when the repayment plan is complete and 30 – 60 days have passed since the final payment.
For more free informatiabout about bankruptcy go to www.declaringyourselfbankrupt.org where you will find a load of useful informatiabout and tips about declaring yourself bankrupt. Visit the Uber Article Directory to get a totally unique version of this article for reprint.
