Bankruptcy laws allow people to erase their debts and start fresh. America’s bankruptcy laws changed back in 2005, making it harder for people to start over. It is important to understand the pros and cons of bankruptcy before filing. This guide provides information on knowing when and How To File Bankruptcy.
Steps in a Bankruptcy Filing
Consider your options. Contrary to popular belief, bankruptcy is not a ‘clean slate’. Certain debts such as child support and mortgages cannot be erased, and a bankruptcy can stay on your credit history for up to a decade. Bankruptcy should be used only after you have tried other options such as debt consolidation, credit counseling and refinancing or loan modification.
Know when to file. In some instances, bankruptcy is the only real option. Filing results in the prevention of further collection attempts, and when your case goes to court, most or all of your debt can be relieved. Bankruptcy is ideal in cases where an unemployed person has exhausted their savings, or with wage garnishment.
Hire an attorney. If you have decided to file for bankruptcy, you should have a lawyer to help. Not filing the paperwork correctly can result in your case’s dismissal, and a bankruptcy lawyer can make sure that papers are properly filled and submitted.
Determine how much bankruptcy filing costs. You will pay lawyer fees and court costs in all cases. Some attorneys charge a flat fee, and others charge on a sliding scale that depends on debt level.
Choose a bankruptcy type. The most common is Chapter 7, which is a liquidation bankruptcy. Your debts are erased, and you can keep your assets as long as payments are made. Non-protected assets are surrendered so creditors can be paid. Chapter 13 allows for a payment plan of up to five years.
The Bankruptcy Code’s Section 109(h) stipulates that people must get credit counseling by a US Trustee-approved service within six months of filing for bankruptcy. Your Aurora Bankruptcy Attorney can help you to complete the Bankruptcy Abuse Prevention and Consumer Protection Act’s ‘means test’ to make sure you file correctly. Credit counseling provides people with alternatives to bankruptcy, and the means test determines which type of bankruptcy applies to your case. Read more about bankruptcy.