What You Should Know About Filing Personal Bankruptcy… It is not enough to make an excuse out of your debts when you file for bankruptcy protection. There are several factors you should consider before making the final decision to declare bankruptcy. The intricate puzzle involved during bankruptcy application will not only require your time, but it will also eat up a huge chunk of your budget on filing fees alone. There is more than one way to pay your debts and bankruptcy should be the last resort to choose.
First of all, before you decide to file for bankruptcy protection, talk to a credit counselor or a lawyer. This is not something you can do on your own. You can read the basic rules and provisions of the bankruptcy court, but the system is composed of labyrinthine processes since the inception of the Bankruptcy Act of 2005, and a lawyer’s services are a great help to facilitate the bankruptcy application.
The court requires a debtor to undergo a credit counseling program to help him decide if bankruptcy is really the last resort for his financial crisis. The agency conducting the counseling should be accredited by the bankruptcy courts. For those who do not know of any accredited agency, the National Foundation for Credit Counseling has a list of accredited counseling agencies. It is important that you take it within 6 months before the formal petition. Make sure to keep a certification so you can include this with other paperwork required for filing.
Another important thing that a debtor should know when filing for personal bankruptcy is the difference between Chapter 7 and Chapter 13. These two are the most common options usually considered for personal bankruptcy. Where Chapter 7 allows liquidation of assets during bankruptcy protection, Chapter 13 gives debtors a chance to pay their debts through a debt reorganization plan. In the former bankruptcy program, your assets are liquidated to pay off your debts, but in the latter, you get to keep all your assets. Both programs however require a credit counseling program, as well as debit counseling. An automatic stay is also applicable for both programs where the bankruptcy courts issue this directive to prevent creditors from further communicating with the debtor and performing collection actions. Since this is the case, a trustee is randomly assigned by the bankruptcy court to every case so that this person will serve as the mediator between the creditors and the debtor. The role of the trustee varies for each bankruptcy program; however, one thing is definite: he has the authority to execute all the necessary actions to facilitate the bankruptcy proceedings.
Lastly, before you take the ultimate plunge to file for bankruptcy protection, think of what damage it might do to your credit rating. A Chapter 7 bankruptcy program will remain in your credit record for 10 years maximum, and a Chapter 13 stays in your record for a maximum of 7 years. Should this be the case, you will have a difficult time in applying for another credit card or availing of a personal loan. Furthermore, purchasing a car or home will be difficult as well.
Be informed! Read bankruptcy basics and if you don’t understand something, consult your lawyer. A lawyer’s service is invaluable in bankruptcy proceedings.