Personal bankruptcy cases are on the rise. Hundreds of thousands of Americans declared bankruptcy in 2007 and the rate of filing has not slowed down in 2008. A tough economic state and lack of stable employment and job security are only part of the reason. Personal spending habits have certainly contributed to record levels of credit card debt and the current housing market has left many with high balance loans and depreciating values in many parts of the country.
Whatever the circumstances may be for you, it’s important that you educate yourself as much as you can and carefully assess your own financial situation before you proceed with bankruptcy. There are several types of bankruptcy that cover not only individuals but small and large businesses and of course special codes for corporations. Chapter 7 and Chapter 13 are the two types of personal bankruptcy and the most commonly filed, Chapter 11 is similar to chapter 13 though this is what an LLC, partnership or corporation would want to file.
Please take note that none of the content here is meant as legal advice nor is it intended to encourage anyone to file bankruptcy. This option should be a last resort, there are alternatives to bankruptcy that you should consider.
What is bankruptcy?
Bankruptcy is a legal proceeding in which people, companies or corporate entities who can no longer afford to pay their creditors, can get protection through a court order called “The Order of Relief”. Bankruptcy offers a fresh financial start and these benefits are afforded to all by federal law, therefore all bankruptcy cases are handled in federal courts.
It puts into effect the order of relief also known as the automatic stay which stops your creditors from attempting to collect payments from you, that is until your debts are sorted out through court proceedings. The automatic stay is further explained in the Chapter 7 section.
During the process of filing, you will need to provide specific documentation such as past tax returns, proof of income, a breakdown of all your debts, all property and assets you own, etc. It is possible to file your bankruptcy case alone but the paperwork is complicated and can be confusing.
Hiring a law firm that specializes in personal bankruptcy cases is usually the best thing to do. These services aren’t cheap though, and if you’re struggling to pay your creditors you may have trouble paying the fees for these services, which need to be paid up front. So it’s important you prepare in advance and allocate some funds early when you begin to consider bankruptcy as an option.
There are a few chapters in the US bankruptcy code. Chapters 7, 9, 11, 12, 13, and 15. You will get a detailed explanation of chapters 7, chapter 11 and chapter 13 here since they are the most common forms for individuals, partnerships and small businesses. It’s easier for a professional to determine which chapter you qualify for, however by learning about what each chapter does and how they work you will get a good idea for which one will fit you best. Here’s some of the information you’ll need to provide when you file:
|Property(s) you own||Any and all real estate property you currently own.|
|Properties you owned||Any properties you have owned in the past 2 years.|
|Properties sold/donated||Any properties you sold or donated in the past 2 years.|
|Property you claim as exempt||Any property including vehicles that you consider exempt|
|All of your current income||Include wages, social security benefits, VA benefits, alimony etc|
|A list of all your debts||Include everything you owe and to what creditor.|
|Monthly living expenses||Electric, gas, insurance, child support, food, medical etc.|
|Income tax records||You’ll need to provide 2 to 3 years of income tax records when you file.|
Neither one of these chapters will make it easier on your credit once you’ve filed. The difficulties after bankruptcy obtaining credit, renting a place to live, and qualifying for certain jobs will be the same. Unfortunately, the fresh financial start can be hard to embrace when you decide to take this route and the hardships will probably continue if you’re not prepared to deal with what comes after.
Normally after bankruptcy, most credit providers will not want to deal with you. The ones who will impose high-interest rates and/or high-security deposits because of your recent bankruptcy case. Learn more at http://markalexander.over-blog.com
When you file you will be required to take bankruptcy counseling courses, also known as credit counseling, from an agency approved by the US Trustee. You can find a list of approved agencies at this link: US Trustee Approved Credit Counseling Agencies. The costs are usually moderate, $20 to $30 dollars should be a good range to stick to. You will need to take the first part of this personal bankruptcy training before filing and then the second part before you get discharged.