Consumer debt, and lots of it, is the norm rather than the exception in today’s society. It’s also one of the main causes of the difficult economic situation that the nation is facing.
Are your debts overwhelming? Are you worried about how you're going to pay all your bills this month? Are you considering filing personal bankruptcy? Before you decide to take this irreversible step, make sure you understand what bankruptcy is and how considering bankruptcy may affect you.
U.S. Bankruptcy Law Basics :-
The purpose of bankruptcy is two-fold:
To provide relief when you cannot pay your debts
To return as much money as possible to your creditors
There are several steps involved with declaring bankruptcy.
First, you may want an attorney because legal paperwork must be filed in U.S. Bankruptcy Court.
Second, you need to be aware of the filing fees, which in 2006 were $299 for Chapter 7 and $274 for Chapter 13, in addition to attorney fees (variable).
Third, you must determine the type of bankruptcy you can file. There are two types of personal bankruptcy most often filed by a consumer: Chapter 7, which erases most of your debts, and Chapter 13, which creates a debt repayment plan.
Bankruptcy Reform Act has made it more difficult to file a Chapter 7 bankruptcy. First, you must attend a credit counseling session from a government-approved credit counseling agency within 6 months before filing your bankruptcy petition.
Bankruptcy does not eliminate
Chapter 7 does not eliminate:
Government student loans
Taxes
Fraudulently created debts
Alimony
Child support
Chapter 13 does not eliminate:
Educational loans
Child support or alimony
Debts for luxury goods of $500 or more that were incurred within 3 months before filing for bankruptcy
Cash advances of $750 or more obtained within 70 days of filing
Drunk driving damages; personal injury lawsuit damages; fines related to criminal prosecution
Income tax debt arising from fraudulently filed tax returns or from tax returns that were not filed or filed late
Trust fund tax debt
Consider The Impact of Bankruptcy:-
Financial relief can be a positive effect of bankruptcy; however, you should weigh this relief carefully against the following:
Bankruptcy can stay on your credit report for up to 10 years
You may have difficulty re-establishing credit
You may have difficulty renting or buying a home for several years
Your debts can only be discharged once every six years under Chapter 7
It may be more difficult for you to get some types of jobs (particularly those dealing with money).
The Final Decision
Making the decision to declare personal bankruptcy is not one to be taken lightly and should be considered as a last resort. You may have other options that will work for your situation — make sure you explore them all. Click here to read Bankruptcy Alternatives
