How To Know When to File for Bankruptcy

If you are living under a mountain of debt, you might be tempted to file for bankruptcy. But a mere statement of bankruptcy is not admissible under bankruptcy laws. The courts require more than that. When you file for personal bankruptcy, you will have to face dire consequences such as losing your prized possessions, damage to your credit scores, and losing your credit cards and other assets. You can also face possibilities such as home foreclosure, getting rejected from insurance companies, and unemployment. Experts say that bankruptcy should only follow the last straw that breaks the camel's back. There may still be ways to salvage other options just before you sink.

Just before you make the decision, you should follow these procedures to make sure that you have exhausted all your resources. The first step is always to consult a bankruptcy lawyer. He will provide you with the bankruptcy information you need to determine if there can still be something to remedy the matter. Remember that any of the personal bankruptcy forms should be filed in court only after meeting the conditions set by bankruptcy laws. When you file for a personal bankruptcy case, the court will release an automatic restraining order to stop the creditors from pursuing you. You also have to get credit counseling to determine that you have an income lower than what is specified. It will be six months of credit counseling before you can be allowed to file for bankruptcy.

If you have gone through the steps mentioned above, you could then file for bankruptcy. Just to make sure though, here are some more things to consider.

  1. You should only file for bankruptcy if you have exhausted all your resources. You should have gone to credit counseling and have talked extensively to your bankruptcy lawyer about this matter. The bankruptcy will affect your life, as it will be retained on your credit sheet for 10 long years.
  2. When you file for bankruptcy, you must determine which type you would go for. Chapter 7 cases are aimed at liquidation while Chapter 13 cases are for the repayment of individuals. Ideally, you would go with Chapter 7, but recently a means test has been administered to check on your income to make sure that it is way below guidelines. If you fail this test, your case will be classified as a Chapter 13 case immediately.
  3. Obtain a competent lawyer who knows the ins and outs of the bankruptcy case. You should regularly meet up with him to discuss the merits of the case. He would then help you with the means test.

Check the filing fees first. Filing fees can depend on your location. Courts can charge you anywhere from $1,700 or higher, though it can be free if you have no means to pay. It can also depend on the type of bankruptcy case. A Chapter 7 case needs full payment of all fees before it is filed. However, in a Chapter 13 case you can forego all charges, including the lawyer's fee, once agreed to by both the bankruptcy lawyer and client.


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