Filing bankruptcy Information And Help

Bankruptcy will help you to become debt free the hard way. Although filing bankruptcy is the last resort and debtors steer away from this debt help option, but if this is the only option you are left with, there is no other alternative but to avail it. Make sure you have a bankruptcy attorney to represent you. It will hasten your get out of debt process. You will get detailed information about bankruptcy from your attorney. He can be of immense help to you.

There are many websites that offer extensive information about the process. The federal government has introduced certain changes in the bankruptcy laws that came into effect on 17th October 2005. The new bankruptcy laws were introduced to reduce the number of debtors filing bankruptcy. The bankruptcy guidelines have become more rigid than before.

One of the main changes introduced was the Means Test. This is a test that decides whether you are eligible for filing bankruptcy under Chapter 7 bankruptcy code or Chapter 13 bankruptcy code.

How does the means test determine your eligibility for Chapter 7 bankruptcy?

When you take the means test, your income is compared to the median income of a household that is similar in size and one that is in the state in which you reside. If it is found that your income is higher than the median income, you don’t qualify for Chapter 7 bankruptcy. Under such circumstances, your bankruptcy attorney may suggest you to file Chapter 13 bankruptcy.

Credit counseling has been made mandatory

As per the new federal bankruptcy laws, credit counseling has been made mandatory. You are required to avail a credit counseling session or “special pre-bankruptcy briefings” from debt counselors approved by the federal government.

Chapter 7 bankruptcy

When you file Chapter 7 bankruptcy, a court appointed trustee takes care of your debts. Your non-exempt assets are liquidated (hence Chapter 7 is referred to as liquidation) or sold off so that the proceeds of the same can be used to pay off your creditors. It may be mentioned here that you cannot enjoy state as well as federal exemptions simultaneously. Chapter 7 is a good option if you are cash-strapped and finding it difficult to pay your creditors.

Chapter13 bankruptcy

If you have enough cash to make payments regularly to your creditors, you can file Chapter 13 bankruptcy. In Chapter 13 bankruptcy, you are given a repayment plan and you are expected to abide by the same. It helps you to get out of debt within a span of 3 to 5 years.

Filing bankruptcy affects your credit score

When you file bankruptcy, your credit rating gets damaged to a great extent. Getting fresh credit from your lender becomes a distant possibility. You hardly find any financial deal that will enable you to enjoy financial benefits or help you to enjoy favorable terms and conditions.

However, filing bankruptcy is essentially not the end of the world and there are many ways in which you can improve your credit rating and show creditors that you are financially responsible.