Filing Bankruptcy - The Downside to Filing Bankruptcy

Author: Corey Landis

Depending on your current financial situation, bankruptcy might seem like the only answer. While in many cases this may be true, there are other solutions which might prove to be the better choice.

The biggest downside to bankruptcy is the fact that it remains on your credit report for up to 10 years. During this time it will be much more difficult for you to establish a positive credit history. Many credit applications ask if you've ever filed bankruptcy, so even if the 10 years have passed and it's not on your official credit report, you have to answer yes.

While your credit report will drop the bankruptcy after 10 years, the federal court has it on record forever. Those records are open to the public.

Your credit report can be checked when you apply for employment so a bankruptcy can affect your ability to get a job in some industries. Car insurance companies look at your credit score as a measure of reliability. A bankruptcy is looked at unfavorably and can result in denial of insurance, or insurance only provided at very high rates. When moving, it can even be the deciding factor in whether or not you live in the residence of your choosing. Many apartment leasing companies won't approve a lease to a person with a history of bankruptcy, even if they have the financial ability to now make the lease payments.

Another downside to bankruptcy is the cost. Recent changes in bankruptcy laws have initiated a huge increase in filing fees. While it's possible to file a bankruptcy without an attorney it's not recommended in complicated cases. Certain debts such as student loans and back child support can not be erased. Add the filing fees to the cost of retaining a bankruptcy attorney and you are talking about fees probably in excess of 00.

If you have equity in your home you may not be able to retain it but be forced to sell the home to pay off debts. While your debts may be high, if you have substantial assets it may be financially advisable to not declare bankruptcy.

One of the conditions of the 2005 changes in bankruptcy law now requires individuals to seek credit counseling prior to filing. If at all possible, you should consider using a credit counseling agency or even a debt consolidation service before deciding to go bankrupt. The credit counseling service must be government approved to satisfy this requirement.

Other changes require that if you can pay at least 0 per month towards debt payment you must file Chapter 13 instead of Chapter 7. Chapter 7 means all your debts (with the exception of back child support, taxes, and a few others) are forgiven and you come away with a clean slate. Chapter 13 requires that you come up with a strict repayment schedule based on your income and assets to pay off as much of your debts as possible within a 5 year period.

You will find yourself on the road to good credit much sooner, if you can utilize a method other than bankruptcy to help you get out of debt.

Article Source: http://www.articlesbase.com/finance-articles/filing-bankruptcy-the-downside-to-filing-bankruptcy-576361.html

About the Author
Corey Landis contributes to several websites including Credit Card and Debt Management and Loans as well as Ways to Find Money

Filing bankruptcy is the last draw if you can't find any other solution to your financial and debt problems. This serious step keeps you protected from your creditors but you have to go through a lot of trouble for the proceedings. Federal bankruptcy law oversees the procedure, however, recent changes to the law have made filing bankruptcy more difficult.

The first thing bankruptcy law requires is that you contact a bankruptcy lawyer. A bankruptcy lawyer can be found through local and state bar associations (for referrals) or you can ask around for an attorney you can trust to do a good job. The next step is to collect all your financial papers and bring them to your bankruptcy lawyer's office. Don't forget to bring outstanding bills, bank statements, and paycheck stubs from the last six months, mortgage and car loan information, as well as tax returns.

All the paperwork that your bankruptcy lawyer will put together when filing bankruptcy is called a petition. The petition, according to bankruptcy law, must list every debt you currently owe. In the case that you purposefully leave out creditors, the court has the right to dismiss your case entirely, and you won't be given a chance to file for bankruptcy at all. This is a federal crime under bankruptcy law as well - never lie when filing bankruptcy.

Talk to your bankruptcy attorney about all the debts you have, both secured and unsecured, and ask whether or not some of your debts will still be around after bankruptcy has been filed. If they are all discharged you won't have to pay any of them after bankruptcy proceedings. Taxes, student loans, and child support are all payments it's extremely difficult to have discharged.

Be honest with your bankruptcy attorney about all the income you have been able to earn over the past 6 months, even if from a source other than your regular job and paycheck. This is another form of information that the law requires you include when filing for bankruptcy, so disclose all finances fully.

Find out if you should file a chapter 7 - this will depend on the type of debt you have, and the amount. A chapter 7 is also known as liquidation bankruptcy. If you don't fit under this category, you'll probably have to file a chapter 13 instead. A chapter 13 bankruptcy is referred to as an adjustment of debts petition. This option applies if you make a decent living and have fallen behind on secured debts, such as house payments, as this type of bankruptcy gives you a chance to catch up on the payments you owe.

Once all the paperwork has been compiled and everything has been checked over with a fine toothed comb, it's time to sign the petition in the appropriate places as a way of stating that the information you have provided is true. Nowadays you can file a petition online, which is very convenient, with your local district. Without an attorney the process can be daunting, and you have to do it in person or through U.S. Mail.

Applying for insolvency in the UK can be a scary experience but not an impossible task. For filing bankruptcy individual just need to do your homework properly.

]]> http://www.realbankruptcyinfo.com/1094/the-way-to-file-bankruptcyinsolvency/feed/ 0 http://www.realbankruptcyinfo.com/1079/shall-i-file-for-bankruptcy/ http://www.realbankruptcyinfo.com/1079/shall-i-file-for-bankruptcy/#comments Wed, 10 Mar 2010 23:33:34 +0000 admin http://www.realbankruptcyinfo.com/1079/shall-i-file-for-bankruptcy/

Many people are not sure if they should file bankruptcy or allow a foreclosure. This is not a decision which can be made easily, and is really not a straightforward case. A mortgage lender will file a foreclosure action when it is not paid its monthly mortgage payments. The only way to stop this from occurring is to pay the mortgage lender.

Understandably, most people do not want to have their car repossessed, so they make their car payments on time every month. If a person does not make their mortgage payments, they face the loss of their home through foreclosure.

Bankruptcy is a legal action filed by someone who cannot pay his debts. This action stops all civil proceedings against the debtor while the debtor is in bankruptcy. As a result, the mortgage lender is incapable of immediately continuing their foreclosure, or any other legal action. On the other hand, a mortgage lender can get around this by filing for a relief from automatic stay and proceeding with their action once the stay has been granted. Essentially, bankruptcy will not stop foreclosure, and will not allow anyone to keep a home without paying the lender. Slowing down the legal process is all that bankruptcy can achieve.

Occasionally, however, foreclosure is prevented through bankruptcy, as the latter gives person additional time in which to pay the lender and usually makes the paying easier. Bankruptcy makes a mortgage lender pause in their foreclosure efforts, and a debtor has a little extra time to raise the money.

Through bankruptcy, many unsecured debts are eliminated completely, and a person who is in debt will frequently find that they have money to pay their mortgage payments with that they didn't before bankruptcy. A chapter 13 bankruptcy allows the debtor to pay the mortgage over a period of time through a court ordered payment plan.

However, not everyone qualifies for filing of bankruptcy in the first place, and those that do must pay sufficient legal fees. Legal bills can be quite high, and high enough that they outweigh the costs of catching up with the mortgage. Anyone considering bankruptcy to prevent foreclosure should discuss it with a lawyer. No one should attempt a complicated legal process like bankruptcy without legal aide. This article is only intended to give general information, so for more detailed information, contact a lawyer in your state.

A bankruptcy lawyer is there to represent and protect his client during the bankruptcy process which can be an extremely stressful time for many people. As the changes in the law have meant that filing for bankruptcy is now more time consuming, it means that a number of people have found themselves struggling with the process. Although the amendments to the bankruptcy law are designed to eliminate the time wasters, no other real changes have been made.

Some States also have additions to the federal code but your bankruptcy lawyer will be able to inform you about these and how they will affect your bankruptcy period. The Insolvency law is designed to protect certain things like your house and car. Very soon after you have filed for bankruptcy, you will begin to get credit offers and you will want to exercise great caution in deciding which offers to accept, and when to accept.

You will notice within a short period of time after your bankruptcy has been filed that applications for credit are already forthcoming.. What this means is that within a relatively short space of time after you become bankrupt you will start receiving credit applications but at this stage you must be very careful. This is the reason why not long after you have been made bankrupt, a whole host of companies offering credit will start contacting you, but you must be very careful at this time.

To prove this point, your lawyer should warn you about certain financial companies that contact bankrupt people and offer credit. Extreme caution is required here.

It is not because the individual is a failure looking for an easy way out of his debts as the credit companies would like you to believe. Bankruptcy is generally seen as a last resort, but as legislation continues to add changes, it will become harder for individuals to apply for bankruptcy. While there are obviously some people that want to take advantage of the bankruptcy protection system, your bankruptcy lawyer will assure you that you are just a victim of bad luck who is being given a second chance.

Bankruptcy is something that a lot of people have gone through, but no matter how bad your situation is, there are ways that bankruptcy can be avoided. Here are some of the ways that you can avoid filing for bankruptcy.

Debt settlement

If you have trouble keeping up with the minimum payments for the debts that you have, you might want to consider debt settlement.

Below is a list of items that you must think about when you are deciding to file for bankruptcy.

1. Cost. Most attorneys will try to get as much as they can out of you. Know that a typical Chapter 7 costs roughly $700 to $800, this figure really depends on the situation; however, if you have no unusual assets (such as a large boat or another house in Aspen) then look for the magic $700 to $800 number. Chapter 13s are closer to $1200 to $1300.

2. Most firms will allow you to set up a payment plan. Normally, they will ask you for $100 a month and some will even offer $50 a month. Please be aware that if they do not offer a payment plan, you probably want to go with a different attorney.

3. Although the costs quoted above are a lot of money, the attorneys you hire should get on the phone to your debt collectors soon after you hire them. Within the week of you signing with an attorney, you sould stop getting those nasty creditor calls!

4. Moreover, as soon as you hire a lawyer, you can stop worrying about your debt. You can immediately cease payment on most of the credit card or medical bills that you are struggling with.

5. Be careful of hiring any law firm that advertises on TV on a regular basis. These firms usually are "bankruptcy mills," processing thousands of bankruptcies per month. The downside to this type of firm is that you may end up with someone that will not give you the care and attention you deserve. Much better to go with a smaller, less money-hungry firm. This concept became clear to me when I was researching firms for my own bankruptcy, which I did when I lived near the Milwaukee area a few years ago. After several meetings, I found a good but fair-priced firm called Debt Advisors (their link is on the right) -- try to find something like them in your area.

6. Once you hire an attorney, your bankruptcy should begin immediately, and the entire procress (from the time you fill out your paperwork to the moment of meeting with a judge and your debt is wiped clean) should last 90 days, roughly -- again, this time frame depends on how usual or unusual your case is. Also note that 7 years after you file, the slate is wiped clean, and you can file for bankruptcy again if you need to.

7. Finally, the most important thing to know is that when you meet with a lawyer, you should get the feeling that you trust them; after all, they are handling one of the most important decisions you will ever make.

Everybody has financial problems at some time. Occasionally life slaps you down from numerous directions at times that couldn't be any more untimely, and you require help as soon as possible. Combine these knocks with the dismal times that we're presently encountering in this American economy, and it can be a frightening time to struggle to make ends meet. The principal factor to deal with when you're confronting grave financial distress is to take the whole thing into account before you do anything hasty, since in the majority of cases a firm measure of will power and discipline could get you through the tempest. However, there comes a stage when bankruptcy develops into the only practicable alternative, and it's at this moment that you have to be certain that you have all your bases covered.

There are numerous gauges to be watchful for that might warn you that you are on the path to bankruptcy. Following are some subjects to examine and evaluate with your present financial circumstances. If you see yourself accurately illustrated by a number of these issues, then it might be the time to meet with a bankruptcy attorney and work out what your subsequent steps ought to be.

1. Repeated overdraft fees. Everyone gets overdraft fees from time to time. But, if you find that you are overdrafting on an extremely frequent basis, you should inspect your bills along with your living expenses to find out whether you're living beyond your means, or if you're completely incapable of producing the funds required to cover your expenses and debt.

2. Children. If you're in a financial jam and you have children, it becomes very much more difficult to dig yourself out of a pit. Kids are a principal forecaster in bankruptcy cases. It would be smart to evaluate your bills with your monthly account and discern if you're genuinely able to provide for them.

3. Credit card problems. You should first gather your credit card statements together. See how many credit cards you have. Check how many of them are maxed out and how many are over or right at the limit. You need to be able to keep below 30 percent of the credit limit on your cards and loans. Any other number and you could end up in a dire situation.

4. Collectors are calling. If you're accustomed to disregard your phone because of non-stop bill collectors calling you for overdue bills, chances are you're headed for trouble.

Those are only a few questions to consider while you're looking at your financial outlook. Bankruptcy is a severe choice, and ought to only be a only remaining option for the majority of folks. For most people, there is a good possibility that they may be able to pull themselves out of the hole if they would sit down and devise a arrangement that will eliminate debt over time by giving up some luxuries and obtaining assistance with a monthly budget. But, if you discover that it's improbable that you'll be capable of getting your head above water soon, then you might want to consider bankruptcy as a potential fresh start.

Since the bankruptcy process is already complicated, you need to get a way to make it as easy and as smooth as possible for you. Nowadays there are ways for individuals to file for bankruptcy online and it is making the process easier. There are many web sites available to guide you through the process from start to finish. The sites have a step by step guide of how to file to how to print the relevant documents.

You can also go to a search engine like

So what are the different types of bankruptcy, and which one should you apply for? There are essentially three different kinds, and which one you decide to file for is based on your current financial situation.

The first, and probably the worst of the three, is chapter 7. For this, you will have to use your personal assets (ie house, car, whatever is non exempt) to pay off your creditors.

Yes, this can be a very difficult process, as saying goodbye to these possessions you worked for and earned is not easy. However, when you are done, you will be completely discharged of your debt, and can therefore get on the path to achieving financial freedom.

With that said, chapter 7 is the cheapest type of bankruptcy to apply for, and also by far the easiest to get accepted for, because it doesn't require any sort of payment plan. All you have to do is liquidate your current assets, and you are done.

However, this might not be your best option, and here's why: with chapter 11 and 13, you don't have to liquidate your assets, and can in fact pay off your debts with the future income you generate.

Of course, in the case of chapter 11, you will need to show a detailed plan for paying off your debts, and the court needs to approve it. also, you will need to show that you have enough income coming in, as well as a reasonable amount of debt to pay off, that the plan is feasible.

No far out projection or speculations with these types of bankruptcy-if the income isn't there, this won't get accepted, and you will have to use chapter 7. However, keep in mind that chapter 7 is only applicable to business bankruptcy, and not personal. That's where chapter 13 comes in.

For this, you also need to demonstrate that you have a steady income coming in, as well as relatively low amounts of debt (check your local area for the exact amounts). If you can show this, then the courts will draw up a 3-5 year plan for you to follow in order to pay off your debts.

With this plan, you can use it for personal bankruptcy and business bankruptcy (except in the case of a corporation). While both of these are more expensive to file for than chapter 7, if you do qualify, they certainly will be worth it, as you will be able to retain your personal belongings, and your business, if you own one.

Note: in the case of chapter 13, the records of your bankruptcy stay on your credit report for 10 years, which can make taking out a loan a difficult proposition. However, if that's what you have to do, than that's what needs to be done. Hopefully this info on the types of bankruptcy will help you know which is the right choice for you.