What is the Cost of Declaring Bankruptcy and Are There Any Other Options?
Author: Joseph Kenny
A lot of people are running into financial difficulty these days – especially with a lot of major corporations going through layoffs and buyouts. What this means is that a lot of people find themselves suddenly unemployed and it may take some time to get another good paying job. When financial difficulties come, and they stay around for awhile, the thought of declaring bankruptcy will come into some people’s minds – especially when the debt starts getting out of hand, with no light at the end of the tunnel. Here are some thoughts about bankruptcy that will help you to make that important decision of “Should I, or shouldn’t I?”
What Declaring Bankruptcy Means
Declaring bankruptcy is basically an indication that you are not able to pay the debts that you have legally incurred. For this reason, and the legal examination of your bills and the way you handle your finances, as well as the humiliation involved, makes it a rather stressful process. It means that you will have to seek credit counseling, too.
Because so many people are attempting to get out of their debts, for one reason or another, Congress has passed an Act, which was signed by President Bush in 2005, to place certain limitations on declaring bankruptcy and who can do it. This Act, called the “Bankruptcy Abuse and Consumer Protection Act,” seeks to make it more difficult to declare bankruptcy and to help the creditor to receive a higher degree of compensation. This Act called for higher bankruptcy filing fees, credit counseling, and making it more difficult to file under Chapter 7, making it necessary for more people to file under Chapter 13 bankruptcy. Many other details are also covered in the Act that place further limitations on bankruptcy.
Two Types of Bankruptcy
Filing under a Chapter 13 bankruptcy means that there is a “reorganization” of your finances, and it does mean that you do repay much of your existing debt. You are required to make a plan that enables you to pay back a lot of your existing debt in the next three to five years. This means the sale of some of your properties (or all of them) in order to satisfy the debt. It is the bankruptcy Trustee who will make the decision as to what needs to be sold – not you.
Filing under a Chapter 7 bankruptcy means, once again, that the various assets that you do currently possess will need to be listed, by requiring you to take a “means test,” and then a decision will be made as to what you can keep and what you cannot. Everything will fall under an “exempt” or a “non-exempt clause.” You keep the “exempt” items, and lose the rest. The “non-exempt” items will either be sold, or you will be required to pay them back. Some things that are not exempt are child support and education costs.
The cost for declaring bankruptcy can run up to about ,500 for personal bankruptcy. This includes the filing charges, and the lawyer’s fees. The fees, however, are dependent upon how much of an income you have, and it will vary from one state to another. The process of obtaining a legal declaration of bankruptcy, assuming everything is in order, can take up to six months.
After The Declaration Of Bankruptcy
Once you have obtained a legal declaration of bankruptcy, all of your creditors know where they stand. For some, the debts are discharged, and others have received what will be paid to them, or they know what will soon be coming to them. However, it also means that your credit rates have been destroyed, and it will take years to fully repair it. The bankruptcy is placed on your credit rating and will remain there for the next ten years.
What Other Options Are There?
If you are now in a position where you need to consider bankruptcy, then there are some other options that may yet be available to you.
1. Get Credit Counseling
By this, it means work through a debt negotiation company who will take your case to the various creditors in an attempt to work out some kind of a deal. This could be a good step in the right direction because creditors know that if you declare bankruptcy, then they may not get anything. Oftentimes, they will work with you.
2. Renegotiate Your Loans
Once again, by talking with your creditors, you may be able to renegotiate for better loan terms. This could give you a greater leeway financially that could provide just enough of an edge to enable you to get through it with having to declare bankruptcy.
Article Source: http://www.articlesbase.com/finance-articles/what-is-the-cost-of-declaring-bankruptcy-and-are-there-any-other-options-68910.html
About the Author
Joe Kenny writes for SelectLoans.co.uk, a UK personal loans comparison site, visit us today for information on all loan topics including secured loans UK and links to leading UK providers.
Our Site: http://www.selectloans.co.uk/
What private Student Loans can I get if my parents have declared Bankruptcy and they are my only Co-Signers?
Alright, I am sitting here with 4,989 in Finacial Aid from my FASA and now I need to turn to private loans. The problem is my only Co-Signer’s (my parents) declare Bankruptcy about 6 years ago. Does anyone know of any loan service that will give us a loan so I can go to college?
Can private and fed.student loans survive bankruptcy?
If u took out a huge loan to attend a school and the school turns out to be a scam, left the victim bankrupt and completely broke, via a “trade” school can u declare bankruptcy ? If too much time has passed to file any suits under the statues of limitations, etc…Will the loans survive? They have since been sold to another company’s, loan consolidation?
Now that Sallie Mae is a private corporation, can bankruptcy be declared on student loans?
can private student loans be wiped out in bankruptcy court?
I have so many student loans some of them private and my monthly payment is half my monthly income. I have applied for deferment and should be eligible for it based on the 20% rule but the private loans want me to pay for deferment. I a going to be declaring bankruptcy later on this year and wanted to ask if private student loans can be discharged in bankruptcy as they wont reduce the interest rate nor work with me to accept a lower monthly payment.
Info about Bankruptcy & Student Loans?
I am considering declaring bankruptcy. I am aware of the long term effects of it, and it is truly a last resort for me. I was laid off, and have no jobs on the horizon.
I have about 70k in private student loans. If I declare bankruptcy, will it eliminate the “private” student loans, or are student loans of any kind exempt from bankruptcy?
Additional details…. I have already used all my forebearance and deferment options. It is not like I am trying to be irresponsible. I am trying to do the right thing. I am almost 40, and am not a young silly child. I am out of options, and just need advice.
I presume you are in the US right? I’m in the UK and when i filed for bankruptcy, student debt (what i mean if student loans that are government backed – ie, not just a loan from a bank that was for students) cannot be wiped. This will have to be paid back. You can, however, negotiate new terms at court if these payments are causing unnecessary hardship.
Hope that helps
$4989 seems like a low amount to receive for a student whose parents can’t afford school. Are you sure that isn’t your EFC? Is this the amount on the award letter from your college?
Well if they declared bankruptcy 6 years ago, it’s almost off their credit. Hopefully they have repaired it somewhat since then and at least have a decent score. If not, you’ll be eating it in interest.
Contact your bank/your parents’ bank. Only use them as cosigners if you must. Try it alone first. Options: Bank of America, Wachovia, Citibank, College Loan Corporation, Sallie Mae. You can find them all online.
Also if you want to try for scholarships, go to http://www.fastweb.com and see what you can apply for.
You can also contact your financial aid office and ask about work-study.
Good luck!
you have an interesting situation and i do not have an asnwer except to see a lawyer == student loans are not normally cover other wise every college student would file bankruptcy — but with your school going belly up throws fish into the game — good luck!!! please email me and let me know what the lawyer says!!!
No. Bankruptcy can not be declared on any student loans. Federal or private.
No Bankruptcy law is clear about student loans…. not covered.
If it were then everyone would go to college to be a doctor, come out of college with nothing but $200K in debt and file for bankruptcy.
Sorry, taxes, student loans, payday loans are not included.
ETA- The only way to get rid of student loans (if backed by the federal govenment) is if you are deemed disabled but the SSA and do not have the finances to pay for the loans.