Diving home prices, out of control mortgage expenses, credit card debt, job loss and health problems are among the reasons why millions of American consumers have found themselves in a financial pickle. Some consumers made poor choices leading to their present dire straits while others encountered external forces which have rendered themselves vulnerable.
Filing for personal bankruptcy should be a decision of the last resort, something you do only after you exhausted all of your other options. Those options include negotiating with your creditors, completing debt counseling and restructuring your debt. Still, after doing what you can on your part, you may have no choice: file for bankruptcy and reap the consequences of having your credit trashed.
Personal bankruptcy will stay on your credit record for ten years. You may be able to buy another home, a car or receive other credit well before that time, but there is a certain stigma associated with bankruptcy you need to be aware of.
In 2005, the US Bankruptcy Code was as per the Bankruptcy Abuse Prevention and Consumer Protection Act, an amendment to the code credited with tightening bankruptcy filing rules. Prior to that time it was easier for consumers to file for personal bankruptcy and walk away from their debt. The act requires consumers to receive counseling and take other measures before a judge rules on their case.
Of utmost importance is having legal representation as you work on your bankruptcy filing. Your attorney should be well versed in bankruptcy law, have handled many cases in the past (get references) and is able to answer your questions and outline a course of action for you. The National Association of Consumer Bankruptcy Attorneys at nacba.org is one place to visit to search for personal bankruptcy attorneys in your area.
When meeting with your attorney, you’ll discuss two options: Chapter 7 bankruptcy, which liquidates your assets or Chapter 13 bankruptcy, which is a repayment plan. Your attorney will help you with a means test which will determine if you can go the Chapter 7 route or whether you’ll have to file under Chapter 13.
Find out from your attorney how much he charges for his service. Some will want a flat fee while others may charge by the hour or based on your outstanding debt. Your attorney will advise you on how to handle creditors and when you’ll meet with them per bankruptcy code requirements and discuss every step to be taken including when your debts are discharged.
Keep in mind that not all debts are removed when filing bankruptcy including certain tax payments and student loan debt.