Filing for Personal Bankruptcy Can Be Smooth
Bankruptcy is a term dreaded by both businesses and individuals mainly because of its long-term impact on their credit worthiness. However, there are many situations when bankruptcy works the best to help individuals get rid of their debts and make a fresh start. An expert lawyer firm can help you clearly understand your financial position and explain the various options available to you and their pros and cons, besides helping you through the complete gamut of bankruptcy proceedings.
Resolving Financial Woes
A study has revealed that two-thirds of people who file for bankruptcy in the US cite medical issues as the key reason for their financial woes. Other reasons include piling up of credit card dues, divorce or separation, and the inability to make mortgage payments. However, before you decide to file for bankruptcy do explore other options like non-profit credit counseling, debt consolidation and debt settlement. You can discuss your debt dilemma with a legal expert who will also help you negotiate with your creditors to work out alternate schedules for repayments or waiving off some portion of the debt.
Filing for Bankruptcy
After all other options to deal with your debt problem have been ruled out, bankruptcy is considered. The United States Bankruptcy Code governs the bankruptcy proceedings across different courts. You have the option to choose between Chapter 7 or Chapter 13 bankruptcy filings.
In the case of a Chapter 7 filing, individuals are required to voluntarily turn over their assets to the bankruptcy Court. These assets are then sold and the proceeds used to pay back the creditors. This leads to the discharge of the debt of the individual filing for bankruptcy. Some categories of assets like the motor vehicles owned by you, clothing, pension amount, personal jewelry, household goods and appliances may be exempt from the categories of assets to be handed over. The option of Chapter 7 bankruptcy filing is, however, available only if the individual’s income for the last six months is less than the median income in his/her state. If the earnings are more than the state median level, Chapter 13 bankruptcy is recommended.
The Chapter 13 bankruptcy is a little more complicated and takes a longer time for the discharge of debts. It applies to individuals who have income and the ability to manage the debt under a different payment plan structure. This option offers individuals an opportunity to save their homes from foreclosures besides rescheduling their secured debts for repayment over the life of the Chapter 13 plan. This bankruptcy option protects third parties who are liable with the debtor on consumer debts or co-signers. An important feature of this bankruptcy option is that individuals have no direct contact with the creditors and all plan payments are made to the trustee who in turn distributes them to the creditors. Since the bankruptcy law regarding the scope of Chapter 13 discharge is complex, debtors should consult competent lawyers before filing for bankruptcy.
Going for Credit Counseling
US laws make it compulsory for individuals seeking bankruptcy relief to get credit counseling from a government-approved organization. The course must be completed within 180 days before the filing as it helps in deciding the best option for resolving your credit woes. The course can be done online or by phone or in person and the certificate for the same has to be shown to the court.
Fill the Required Forms and Pay the Court Fees
The next step is go ahead and fill the necessary court forms and pay the court fees. Once you have completed all the formalities in accordance with the law and the bankruptcy petition has been filed, the court appoints a trustee to oversee the case. Applicants need to start paying their Chapter 13 payments one month after their application is filed even if the court has not approved or confirmed the proposed plan. However, if the bankruptcy court does not confirm the suggested plan, your attorney will make the necessary changes
An important step in the bankruptcy proceedings is a meeting with the creditors. Mandated by the section 341 of the bankruptcy code, this meeting involves the presence of the trustee, the individual applying for bankruptcy and the creditors.
Debtor Education Course
Before the final discharge of debts, the individual who has filed for bankruptcy will need to complete a post-filing debtor education course from a government-approved organization. This course helps to learn budgeting, money management and use credit wisely.
To ensure the smooth completion of bankruptcy proceedings and the discharge of debts it is best that the services of an expert bankruptcy lawyer are sought. This will not only ensure that the petition is not rejected on grounds of improper filings or discharge of wrong debts.
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