Advice for Filling Your Bankruptcy

By Steve Buchanan

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Bankruptcy is an option for people who find themselves in over their head in debt. Often times, such overwhelming debt is due to divorce, illness or loss of employment. If you find yourself in financial distress, sometimes bankruptcy is the best option for you as it allows you to develop a plan to repay your debt or have your debt discharged through a liquidation of your assets Bankruptcy is not something that you do on the spur of the moment. Instead you consider it after a well thought out plan only after you have exhausted all your other possibilities. You may need to consider filing bankruptcy if your expenses are increasing because of divorce, job loss, or medical bills, while your income is decreasing because of the same reason. Nobody wants or plans to file bankruptcy, especially with the recent drastic changes in the bankruptcy law which makes it more difficult or even impossible for people in certain situations to even consider it. Consumers who find themselves in the undesirable situation of having a mountain of debt may be considering filing bankruptcy.

Bankruptcy is a personal thing and is also often a very emotional thing, so it is not something to enter into without a very thorough examination of your bankruptcy options and alternatives.

Filing bankruptcy or deciding to file bankruptcy is a very serious decision and should only be done when it is absolutely necessary. In my experience, however, due to human nature, general fear, moral apprehension, and yes, guilt and shame, the vast majority of people wait too long to at least seek input from a bankruptcy professional about whether filing is in their best interest. By waiting too long, consequences can be as small as paying thousands of dollars to your creditors unnecessarily (well, that's not small, but compared to other problems that occur, it is) or as large as rendering yourself completely ineligible to file because of actions you took, or didn't take, ahead of time. Under the new bankruptcy laws that went into effect in 2005, pre-bankruptcy planning is even more important than ever before.

If you can't pay off your debt within three years on the present terms, contact Consumer Credit Counselors, or a similar organization; they can help you make a budget and negotiate a repayment plan that may include a reduced or even zero interest rate on your existing debt. Creditors generally cease collection actions against those participating in CCC plans. To explore non bankruptcy alternatives, create a budget for your realistic, monthly expenditures for current living. Include mortgage and car payments, but exclude all other existing debt service.

There are two types of bankruptcy for such cases. They are Chapter 7 and Chapter 13. While Chapter 7 allows all unsecured debts to be wiped out; though you can lose your property, Chapter 13 gives regular income earners wishing to pay back their debts but can't the opportunity to do so with supervision. The court supervises such payments and a period of time is set for the payment to be made.

The truth is bankruptcy is not a decision to be taken lightly; it must be considered as last resort. And don't ever think you can deceive people and get rid of your debt easily by filing as a bankrupt. You will be seriously investigated to ensure you actually lack the ability to payback what you are owing. If you think you can just file for bankruptcy and then go on spending, you have another thing coming for you.

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