Tuesday, January 01, 2008

Personal Bankruptcy Is Not As Simple As It May Look

By Jay Anderson

For most people, making a personal bankruptcy filing is the only way that they can find their way out of a mountain of financial obligations. Filing bankruptcy is not something that you should be ashamed of, since the statistics indicate that the majority of people who file are doing so due to circumstances outside of their control, and not due to financial mismanagement.

One of the things you need to determine for personal bankruptcy is whether Chapter 7 or Chapter 13 bankruptcy is better for you in your situation. The laws and requirements of these are significantly different, and depend on a large variety of factors that are particular to your situation.

Many people think that filing personal bankruptcy is just a matter of filling out the right forms and submitting them, but the days when that statement was true are long past. With the recent changes in bankruptcy law, this is no longer a do-it-yourself process, and you may wish to consider getting a good bankruptcy lawyer that can guide you through the maze of forms and paperwork. The money spent on a bankruptcy lawyer can more than pay for itself in time saved and assets not liquidated.

Do you know the various types of debt that you have that is causing you to consider personal bankruptcy? You should make a list of the debts that you have and categorize them, since there are certain kinds of debt that cannot be discharged via bankruptcy. These would include alimony, child support, student loans, and several other kinds of financial obligations. If this type of debt makes up a good percentage of your total indebtedness, bankruptcy is not going to help you.

Many people view bankruptcy as a drastic yet very simple method to wipe your slate clean and start over, but bankruptcy is far from simple or quick. From the date you start until your bankruptcy is completed can be a period of several months, regardless of which chapter you file. Also note that a federal bankruptcy judge needs to review your case and actually approve your bankruptcy, where there is a chance that you may not even be legally allowed to file.

Strange as it may seem, the new bankruptcy laws dictate that you must attend some credit counseling sessions. This is strange because the majority of people who file do not do so due to financial mismanagement, but this is still part of the law, so it is something that you need to plan to do.

This is not something you want to enter into until you have considered all of your other options. The reason for this is because a bankruptcy filing will show up as a huge flag on your credit report for the next seven to ten years, and it will be more difficult for you to get credit cards, personal loans, a mortgage, and even employment with that huge blemish on your credit report.

In the world today, being in debt is almost a way of life. But in life, things happen that cannot be foreseen and sometimes bankruptcy is your best option. Ensure that you have investigated all possible alternatives before filing since there are frequently options that are better suited to your situation which do not involve the drastic step of bankruptcy.

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