(The following does not constitute legal advice and PayingPaul.Com makes no guarantees about the accuracy of any information contained herein. For legal advice, please contact an attorney or lawyer licensed in your state.)
When It's Time To Seek Bankruptcy Assistance
For most consumers, personal bankruptcy is a last resort after they've exhausted nearly every possible solution. First they will try budgeting and cutting back any unnecessary expenses. Then they will try non profit debt counseling, but they won't be able to afford the monthly payment. They will then work with a debt settlement company, but unfortunately, the credit card companies may not do the same. They have no assets to liquidate and simply lack the income to stay current or pay down their debts. At this point, declaring bankruptcy is their best solution.
If you haven't tried using the help of a debt management company, simply fill out a form and see if this is what you need to be able to avoid bankruptcy.
The True Costs Of Bankruptcy Help
With new bankruptcy laws filing has gotten a lot more expensive. Not only have court filing fees increased, so too have attorney's fees, as well as the long-term costs in terms of the credit damage (Chapter 7 Bankruptcy can now be reported to the credit bureaus for 10 years). With more and more attorney's under heavy scrutiny by the bankruptcy courts for what they report for their clients, the workload behind filing has increased dramatically, and as a result, so too have the fees. Today, the average fees for filing bankruptcy are between $1500 and $3000. To a person who truly needs debt relief through bankruptcy, this is no small price to be paying.
In terms of the long-term credit score effect, bankruptcy, like most things in life is not black and white-it matters for many lenders but not for some; it can prevent you from being able to get a job with some employers but not for others.
Should I File Chapter 7 or Chapter 13
When deciding on the appropriate bankruptcy solution, you must first take into account your situation and the types of bankruptcy available. There are two types of personal bankruptcy: Chapter 7 & Chapter 13. In a Chapter 7 Bankruptcy, your assets are liquidated (sold) and used to pay back your creditors. In turn, your debt obligations are wiped out completely. Fortunately, there are certain laws that exempt a specific portion of your assets, so in many cases most if not all of your assets will be protected. In a Chapter 13 plan, you pay the debt back over three to five years with your disposable income.
If your debt problem has to do mainly with credit cards or other unsecured debt, then in most cases you will want to declare Chapter 7 Bankruptcy. (Note: under the new laws this can be difficult to qualify for. Follow this link to learn more about eligibility under the new bankruptcy laws). If you do in fact qualify for Chapter 7 and your attorney advises doing so, it is typically the best course of action. Studies show that Chapter 13 has a very high failure rate, and even worse, qualifying for credit after 3 years is perhaps easier if you filed Chapter 7 than if you were still paying the debt back in a Chapter 13 payment plan, although the long-term credit effects do in fact benefit Chapter 13 participants.
Are you sure bankruptcy will help? Let PayingPaul.Com direct you to a debt management provider to obtain a free quote and a no obligation, debt assistance consultation. Simply fill out a form!