Filing for bankruptcy should be a last resort.
The 2005 Bankruptcy Abuse Prevention and Consumer Protection Act brought in legislation making it compulsory for an individual to obtain credit counselling within 180 days of filing for bankruptcy.
One benefit of counselling is that the individual may find a suitable alternative to bankruptcy that they can implement instead.
The most common bankruptcy types are what are referred to as chapter 7 and chapter 13 bankruptcy.
Chapter 7 bankruptcy involves the selling of almost all of one’s personal posessions, but despite this, it is the most popular option.
Should any debt still exist after selling all relevant possessions, this is cancelled, allowing a completely clean slate - however, some debt, such as tax, cannot be written off.
Chapter 13 does not require the liquidation of all personal assets. It works differently in that a repayment plan is put in place to repay all creditors over a 3 to 5 year period.
To ensure that an applicant is being truthful regarding ability to pay their creditors, the 2005 legislation requires a means test to be completed to demonstrate that repayment is not possible, and that chapter 7 is the only viable option.
Not hiring a lawyer is a false economy. You will need help to fill in your details for the BAPCPA’s means test and a lawyer will help decide the most advantageous form of bankruptcy to file under.
“Automatic Stay” is automatically introduced, meaning that any creditors have to deal with your lawyer and may no longer approach you directly for payment of any monies owed to them, once a lawyer is appointed.
Your lawyer will reuire you to make lists of both money you owe, and assets you own, which are later reviewed at a creditor’s meeting at which time the veracity of your financial position is examined and you are recorded answering questions on oath.
The court decides, in a chapter 7 filing, the assets to be sold and the proceeds distributed amongst your creditors, any remaining debt is then written off and you are no longer liable, resulting in a clean financial slate.
In a chapter 13 case, a repayment plan is made, paying all creditors in full over 3 to 5 years, based on your actual ability to pay according to the means test.
60 days after the 341 meeting, your creditors can challenge the discharge or aspects of it. If no petitions are received by the court, a notice of discharge of debt will follow within a few days under chapter 7. In the case of a chapter 13 filing, notice of discharge is issued 30 - 60 days after the repayment plan has been completed, and verified by the court.
If you are considering how to claim bankruptcy, I strongly advise have a look at www.howtoclaimbankruptcy.net for more free information, including advice on how to rebuild your credit score after bankruptcy has been completed. Get a totally unique version of this article from our article submission service
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Tags: administration, assets, Bankruptcy, Debt Consolidation, Finance, financial management, insolvency, insolvent, liquidation, money, Personal Bankruptcy, personal debt, Personal Finance, receivership