What Are The Pros And Cons Of Filing Bankruptcy

what are the pros and cons of filing bankruptcy

Filing Bankruptcy: Clearing the Confusion of New Bankruptcy Laws

Many U.S. citizens turn to filing bankruptcy in effort to stop foreclosure or reduce their debt load. While filing for personal bankruptcy can offer financial relief, new bankruptcy laws enacted in 2005 have made it considerably more difficult to obtain court protection.

Filing bankruptcy today requires the services of a qualified bankruptcy attorney. The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) placed strict guidelines on debtors. In the past, many people filed for Chapter 7 bankruptcy, which dismisses all debts and allows debtors to obtain a fresh financial start.

BAPCPA requires debtors to pay a portion of their debts whenever possible. The amount of debt is determined through the ‘means’ test; a financial tool which compares debtors income to their states’ median income level.

When debtors’ income falls below the median income level, they may qualify for filing Chapter 7. Otherwise, debtors will be required to file Chapter 13 bankruptcy and establish a repayment plan.

Bankruptcy repayment plans typically last three to five years and requires debtors to contribute a substantial portion of disposal income. Debtors are prohibited from incurring new debt for the duration of the repayment plan.

If debtors are unable to adhere to repayment terms, creditors can petition to court to request dismissal of the bankruptcy. When debtors fail out of bankruptcy, all protection from the court is lost and creditors are allowed to commence with collection proceedings; including foreclosure.

When individuals file bankruptcy to stop foreclosure, it is crucial to remain current with chapter 13 payments. If debtors fail out of bankruptcy, the foreclosure process can commence where it left off when the bankruptcy was filed. For example, if the foreclosure was scheduled seven days prior to the bankruptcy petition, it can commence at seven days; leaving debtors little time to locate suitable living quarters.

Additional stipulations of BAPCPA require debtors to undergo credit counseling through an approved U.S. Trustee Program agency a maximum of six months prior to filing. Once counseling is completed, debtors must present a certificate to the bankruptcy court in order to obtain approval.

When filing bankruptcy, debtors petition the court in the district of their primary residence. Shortly thereafter, a 341 creditor meeting is held to develop the repayment plan. The creditor meeting allows debtors to discuss payment options with creditors or their legal counsel.

Bankruptcy experts recommend consulting with at least three attorneys prior to making a commitment. Most law firms offer complimentary consultations to determine if they are suited to represent the client. Filing bankruptcy is a stressful and emotional process, so it is important to work with a lawyer whose personality is suited to yours.

Filing bankruptcy can have far-reaching effects and should only be entered into when all other debt reduction options have failed. These might include budgeting, credit counseling, debt consolidation, or debt settlement.

It is important to understand the pros and cons of filing bankruptcy. Conduct research online or consult with professionals to determine if bankruptcy is the best choice. Seek out bankruptcy alternatives that provide the same result without the severe financial consequences.

About the Author

Simon Volkov is a successful California real estate investor who offers solutions to individuals facing bankruptcy and foreclosure. His website, www.SimonVolkov.com, provides a comprehensive article library covering bankruptcy, bankruptcy alternatives, personal money management and much more. If you need to sell your house fast to avoid foreclosure, submit property information via the “we buy houses” form.

Money Management : Pros & Cons of Filing Bankruptcy

Other articles you might like;

• Bankruptcy Lawyer Fort Lauderdale
• Bankruptcy Lawyer Flemington
• Bankruptcy Lawyer Fresno
• Are you aware of some unknown facts of chapter 13 bankruptcy?
• Arizona Bankruptcy Lawyer Cost