In today's economy many people are struggling with finances and how to overcome so many bills and decreased employment. There are several possible alternatives to debt problems. There is settling out of court with the creditors by making some type of arrangement to pay off the bills, or debt counseling where an agency can assist with getting lower interest rates for your debt, or there is a debt consolidation loan, where money is borrowed against the equity in a home, or the final option, which is filing bankruptcy.
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Reasons for Filing Bankruptcy
Many people file bankruptcy as a last resort due to medical expenses, credit card debt, loss of employment, divorce, or the fact that they were not eligible for any of the above programs. There are two major types of personal bankruptcy that can be filed; they are Chapter 7 which involves a liquidation of assets to pay off bills, or a Chapter 13 which involves a 3-5 year repayment plan to the creditors.
In truth, the act of filing bankruptcy should indeed be your option of last resort, if for no other reason than the long term and drastic effects doing so will have on your credit for the next 7 to 10 years. More often than not, there are better alternatives you should consider, no matter how bleak your particular financial situation seems to be.
Process of Filing Bankruptcy
Filing for bankruptcy involves first consulting with a bankruptcy attorney. The next steps include getting a copy of the debtor's credit report, gathering tax returns for the last few years, gathering deeds, titles and loan documents, etc. The attorney, after evaluating all of these documents, will discuss the alternatives and the next steps. Next a petition will be filed with the courts and a statement of assets and liabilities will be submitted with a list of creditors attached to the courts. If a Chapter 7 is decided the fee to file this is about $200, for a Chapter 13 the fee is about $185.
Once all of the paper work is processed the courts will put a stay into effect which will stop creditors from contacting the debtor, and it will also stop the creditors from taking the debtors property. About a month after all of this is done a meeting will be called in the form of a court date and the attorneys for both sides and the debtor will be present, an agreement is made at this time. Once everything is finalized and agreed upon the courts will discharge the bankruptcy. A bankruptcy can stay on ones credit report for up to 10 years.
Conclusion
Do not attempt to do this on your own. The process of bankruptcy is very complex and the laws vary from state to state. People who have filed in the past have said that if they had to do it over again, they would definitely use an attorney, since doing so saved them much more than the legal fees after all was said and done.
Deciding to file bankruptcy should be an endeavor that is joined into very cautiously and it should only be done after every other solution has been exhausted. Filing for bankruptcy can make it difficult to get a car, furniture, appliances etc. Any type of big purchase can be affected by a bankruptcy.
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