Declaring Personal Bankruptcy

Being a bankruptcy attorney means you get asked a lot of questions on the subject all the time. Things like:

1. What is bankruptcy?
2. How to file for bankruptcy?
3. How do you determine the value of assets in bankruptcy?
4. How can I ‘enter bankruptcy protection’ ?
5. What assets can be taken in bankruptcy?
6. Can bankruptcy stop foreclosure?
7. Can I file for bankruptcy for free?
8. How do I go about declaring personal bankruptcy?
9. What are my chances of buying a home after bankruptcy?

And the list goes on. I mean bankruptcy is a big thing and more and more people are facing it these days than ever before in history due to the bad and continually worsening economic state the world is in. Now, before you make the big decision to file for personal bankruptcy, you need to ask yourself this question…

Is Filing For Bankruptcy The Best Thing For Me To Do?

Now, the answers to this question will obviously affect your final decision on whether to proceed with declaring personal bankruptcy or not, plus if you do proceed, will also assist you in determining what form of bankruptcy to choose from.

Some very important considerations include:

1. Can you discharge your debts or not?
2. Do you want to keep your debts or not, partially or wholly?
3. What will your financial life be like if you do go bankrupt?
4. What is the real cost to file for bankruptcy?
5. How will fling for bankruptcy affect your career?
6. What form of bankruptcy is right for you?

Can You Discharge Your Debts Or Not?

In some cases you may find that filing for bankruptcy will not actually provide you with any financial benefit or relief whatsoever… This depends on whether or not your debts can be discharged. To determine this you need to review all of your debts closely with your credit counsellor or attorney to see if they qualify as dischargeable.

Now, an unsecured debt, which most consumer type debts fall into this category, is for things like medical bills, utility fees, legal fees, credit cards, etc. While secured debts, such as mortgages and car loans, are generally secured against collateral or the asset you are purchasing itself (the car or the property). In the case of bankruptcy, secured debts are not usually discharged unless you surrender the collateral.

Do You Want To Keep Your Debts Or Not, Partially Or Wholly?

Now I know this seems like a pretty stupid question when you are considering going through the bankruptcy process, but if you bear with me I will explain why this is so important for you to consider…

Why on earth would you not want to resolve all your debts as part of the bankruptcy? Well, for instance you may decide that you really need your car and so in this case you can elect to keep the car and continue paying off the loan.

Now, if the nature of all or the majority of your debts are in relation items you cannot dispose of, then you should first consider any alternative arrangements possible – for example consolidation of your debts into one loan for a lower rate, and ideally for a reduced amount (hint: creditors become VERY willing to negotiate the amount and terms of your outstanding debt as soon as they know you are considering bankruptcy! Simply because for them, some money is better than no money at all).

What Will Your Financial Life Be Like If You Do Go Bankrupt?

This is an extremely important question you must ask yourself and it will force you to take a good look at your personal habits and tendencies in relation to how you manage your finances. What is your motivation for wanting to file for bankruptcy? Have you genuinely had a sudden unexpected financial disaster that has left you in a financial position that you simply cannot recover from? Or have you just lived to lavish a lifestyle and spent money way beyond your means and ended up in a bad situation because of your personal spending habits?

This is a great question to ask because if you have poor financial skills and bad spending habits, then filing for bankruptcy could land you in a much worse financial situation down the track than if you never actually went through with it!

How? Simply because if you don’t change your spending habits and you continue to mismanage your finances during the six years following filing bankruptcy the first time, you will not be able to get any additional financial relief during that time. So you must very carefully consider why you have ended up in the position you are currently in when determining the best way to get yourself out!

What Is The ‘Real’ Cost To File For Bankruptcy?

Now a lot of people think that declaring personal bankruptcy will give them a fresh new start and allow them to start again with a squeaky clean credit record. And they are sorely mistaken!

Why? Simply because most people who go bankrupt are required to pay at least part of their debts, which may come out of your personal property or your future income to satisfy your debts.

Plus, the bankruptcy is recorded on your credit file. What this means to you is that it will be extremely difficult for you to get credit again in the future for many years to come, usually between 7 and 10 years. You also need to bear in mind that after this time frame, it can still be quite difficult to obtain credit due to the prior bankruptcy.

So the real cost is not only immediate, but it stays with you financially for the rest of your life in some way or another.
How Will Filing For Bankruptcy Affect Your Career?

Whether you know this or not, many employers actually check your personal credit file before hiring you or considering you for a promotion. So you can understand that having a bankruptcy on your file is not a good thing for your career because it will make your employer aware that you are not the most financially astute person, plus it can even raise concerns about whether or not you may be involved in some kind of illegal fraudulent activity.

What Form Of Bankruptcy Is Right For You?

So now that you know a lot more information about bankruptcy and if you still have decided that you have no other choice but to proceed, then you need to know what form of bankruptcy is the best course of action for you to take.

The US Bankruptcy Code has a number of different forms, called Chapters, that define the terms and conditions of the various forms of bankruptcy. For the most part, individuals will generally choose from either Chapter 7 or Chapter 13 of the code.

Chapter 7 Bankruptcy

Otherwise know as a “Straight Bankruptcy” or “Liquidation”, Chapter 7 is characterized by:

1. A trustee is formally appointed to take charge of and administer your property

2. A certain percentage of your assets will be handed over to the trustee. The trustee will then liquidate those assets to pay your creditors

3. You will be able to keep some of your personal possessions and maybe an interest in your home (depending on your level of debts to be paid), however, generally not all of your equity will be yours. This varies from state to state and will be governed by the corresponding laws of where you live

4. The majority of your debts will be cancelled

This type of bankruptcy has been restricted since October 20005, and is dependent on your income as to whether or not you will qualify for Chapter 7. You will of course need to discuss all of these matters with your bankruptcy attorney to ensure you are heading in the right direction.

Chapter 13 Bankruptcy

Also known as “Wage-Earner Bankruptcy”, Chapter 13 is characterized by:

1. A repayment plan for your debts is put forward to the court

2. If this proposal is accepted by the court, a trustee is formally appointed to ensure you make the regular payments and to receive the payments from you for distribution to your creditors

3. You also become liable for paying the trustee fees, and they are generally a fairly substantial amount
Chapter 13 will be available to you if your debts do not exceed certain limits. The amounts should be discussed with your bankruptcy attorney to ensure they are current and in accordance with the laws in your state, and to determine the best type of bankruptcy that is suited to your particular situation.

How To Find A Bankruptcy Lawyer Or Attorney… And How Much Does Bankruptcy Cost You?

The way that bankruptcy attorneys operate is generally on a volume basis and usually for a fixed cost for the whole bankruptcy process. Now the costs are reviewed by the court to determine if they are reasonable or not, which assists to make sure you don’t get charged excessively for the work to be done (which really is the last thing you want when declaring bankruptcy!).

Because they work on volume, you should identify a lawyer or firm who has done a lot of bankruptcy work to ensure they handle the whole thing as quickly and efficiently as possible. You can very easily find a bankruptcy lawyer in your area simply by looking in your local Yellow Pages, either online or the phone book.

How To Locate A U.S. Bankruptcy Court

You can use this directory http://www.uscourts.gov/bankruptcycourts.html to locate the relevant Bankruptcy Court for your area, plus you can download information and forms relating to the whole process.