One should always first consider alternatives to bankruptcy.
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.
There are a number of bankruptcy types (called “chapters”), but Chapters 7 and 13 are the most common.
Chapter 7 bankruptcy involves the selling of almost all of one’s personal posessions, but despite this, it is the most popular option.
However, after all relevant assets have been liquidated, any outstanding debt (there are exceptions, such as tax), is cancelled, allowing a totally fresh start.
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.
Some individuals file for chapter 7, despite having sufficient income to enter into a chapter 13 repayment plan. To ensure that repayment is made when ever possible, the legislation introduced in 2005 requires all applicants for chapter 7 to complete a means test
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.
Also, once a lawyer is acting for you, “automatic stay” comes into effect. This means that creditors can no longer approach you for money. All creditors have to deal through your lawyer.
One of the first things you have to do is supply a list of both debts and personal asets to the court. You will then be recorded answering a series of questions, on oath, at what is called a “Creditors Meeting” where the truth behind your financial submission is verified.
Chapter 7 bankruptcy results in a clean financial slate, as any outstanding debt after your assets have been sold and the monies appropriated, is cancelled.
If, after the means test, it is shown that an individual is in a position where full repayment of debt can be made over a 3- 5 year period, a chapter 13 filing is made and a repayment plan introduced.
Under chapter 13, the notice of discharge is served 30-60 days after the repayment plan has been completed and fulfilled. Under chapter 7, creditors can legally challenge the discharge on the 60th day after the meeting of Creditors. If no representations are made, notice of discharge is issued a few days later.
If you are thinking about how to claim bankruptcy, I recommend 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. Don’t reprint this exact article. Instead, reprint a free unique content version of this same article.
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