Filing for bankruptcy has become a common thread in the fabric of our nation. Many people find as they go into debt over credit card bills and high mortgage interests rates, their options for getting out of that enormous debt are dwindling. Many find bankruptcy is their only alternative to the constant nagging and threats of debt collectors. While some continue to tough their bad situation out, looking for ways on their own to pull out of debt, others have found that filing is the best alternative they could come up with. If you are one of the people who believe you have reached the end of your debt rope, filing may be right for you. But before you dive in, take the time to learn a little bit more about the process and what it will mean to your life.
Things to Know About Filing for Bankruptcy
Since filing for bankruptcy is the route you've decided to take to manage your overwhelming debt, it is important to educate yourself on some key points related to filing.
Research is Key - Before you ever pick up the phone to call an attorney, do your own extensive research on the topic. Find out what preparatory steps you can take on your own to minimize the work you'll have to do after you speak with an attorney. Also, do research to find the best attorneys in your area who can help you file. Most importantly, research to find alternative ways to manage your debt that can steer you away from filing if possible.
All Debt is Not Eligible - Many people are filing for bankruptcy under the misconception that doing so will eliminate all of their debt. This is not always the case, however, because some debts like student loans (which are almost always federally funded) and tax bills are not covered.
Creditors Can No Longer Contact You - Once you file, one immediate benefit you receive is the lack of debt collectors calling you. This is because filing puts them under an "automatic stay" where they are not allowed to try to collect a debt anymore and must contact the attorney representing you to work out any additional details. The only exception to this rule, however, is when you choose to represent yourself.
Filing Doesn't Ruin Your Life - It is true that your bankruptcy will stay on your credit report for 7-10 years. However, this does not mean your life is over. Many organizations in recent times have come up with credit opportunities for those with subprime credit; so now it is possible to get a credit card, or even buy a car or house after filing for bankruptcy. You just have to get out there and find the right opportunities.
Steps to Filing for Bankruptcy
Get Credit Counseling - Before you can officially begin the process of filing for bankruptcy you must go to a U.S. Trustee-approved counseling organization within 180 days of filing. This way, you are provided with your alternatives to filing.
Learn the Types of Bankruptcy Filings - There are two types that you must consider when filing: chapter 7 and chapter 13. Chapter 7 is the option most people prefer to take because it is a complete liquidation filing that dissolves all eligible debt. A chapter 13 on the other hand is more of a streamlined repayment program that gets the creditors off of your back while you come up with ways to repay them. People are finding it is more difficult to file a chapter 7 bankruptcy because most courts don't want people to use it as a way to get out of debt they could actually pay.
Decide Whether You're Filing Solo or With Assistance - Many people have found that they would prefer to file their case without the assistance of an attorney. You are definitely entitled to undergo this process alone; however, it is never really advised. There is so much paper work and so many laws to consider that it is really not ideal to try to do the work of a person who actually went to school for it. If anything, put your energy into finding a lawyer who is very competent and not so expensive (FYI, the most recommended lawyers are those who will charge you based on the amount of debt you have, rather than a flat fee). Just know that when you file chapter 7, you have the pay the lawyer in full before filing, where with a chapter 13, you don't.
Meet with Your Lawyer - Once you choose your lawyer, you will begin the "meat" of the process, which is determining which route is best for you by going over all of your debt. You will also complete a BAPCPA's means test. After this is done and you come to an agreement with how you both will proceed, you can refer the creditors to your lawyer, and from that point on they will no longer be allowed by law to contact you.
Have Your 341 Meeting - This is also called your meeting with creditors. This is the time that you must legally agree to your bankruptcy in their presence and be recorded stating that your answers regarding the petition you're filing are truthful.
Determinations are Made - In your case, if you filed for chapter 7, the trustee will decide if you have assets that can be liquidated to repay the creditors. If you filed chapter 13, you will be placed on a repayment plan that can extend for up to 5 years.
The Clean Slate - After the 60th day passed your 341 meeting, you will be informed of your discharge of debt (if you filed chapter 7). If you filed for chapter 13, your discharge of credit will occur 30-60 days after you've finished your final payment.
Knowing the process behind filing for bankruptcy before you begin will help you make the right choices. However, find alternatives are always more highly recommended than going through with filing. If you find that filing for bankruptcy is the right choice for you, proceed with caution, as you may have found an alternative way to manage your debt had you researched a little bit more.
Jeffrey Meier at Jam727 Enterprises at http://www.thearticlehome.com blog offers even more detailed information on a wide variety of topics.
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