Facts To Consider Before You File Bankruptcy

Before 2005 filing bankruptcy was considered an easy thing to do. If you got into trouble financially, the myth was to go file Chapter 7 bankruptcy and wipe it all away (with a chapter 13 bankruptcy you are set up on a payment plan to pay back your creditors over time but the debts still exist).

However, this usually proves to be the furthest thing from reality. Of course it was simple to file and in 3 months you received a paper in the mail telling you your debts had been erased. Then you started to get a lot of offers in the mail for brand new credit cards and other credit items that would assist you to "re-establish your credit". The trouble with that is now you are free and clear from old debt and take on new debt at a much higher rate of interest in most cases. In the end this would place you right back where you began with mountains of debt. Not to reference the lingering 10 year blemish on your credit reports.

With the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 it modified the aspect of bankruptcy. You can no longer just walk into a lawyer's office and file the paperwork. Currently you have to meet with a credit counselor, get a certificate for verification that you are meeting with one, and make payment arrangements with your creditors for 180 days prior to filing bankruptcy. You basically have to do your due diligence to put your finances in order and only exercise filing as a last resort.

A chapter 7 filing is also tougher to get authorized by the courts. There are certain income levels that you will have to fall under. Your tax returns, pay stubs, and all other financial documents will be taken into court and a judge will decide if you can repay your debt inside of the next 5 years. If it is determined that you are able to repay your debt you will be placed on a payment plan and will have transitioned into a Chapter 13 bankruptcy. This makes it tougher for individuals who want to rack up debt and then not pay just because. The law has been structured for those who actually require it and for protection of you and creditors.

If you are considering filing for bankruptcy you should first collect all your financial information and start getting hold of a local consumer credit agency and receiving a free (in nearly all cases) consultation. They can let you know what your best options are. With people losing their jobs daily and eliminating any and all savings it is reasonable that paying a creditor may take a lower priority to setting food on the table. You should constantly try and talk with your creditors. Don't avoid telephone calls or leave unread mail lying around the house. A creditor may be ready to arrange the easiest payment plan with you if you simply communicate. They do not win either by you not paying so they will be willing to help.

So how do you know when or if it is time to file bankruptcy, or if there are other preferable options available to you? For more insights and additional information about determining if you should File Bankruptcy as well as getting a free bankruptcy evaluation from an experienced bankruptcy lawyer in your local area who understands the bankruptcy process and can let you know what to expect and what your options are, please visit our web site at http://www.bankruptcy-data.com