There are several things to consider before doing anything as drastic as personal bankruptcy. First and foremost, what options are even available to you. Two of the most common debt solutions for most consumers are debt settlement or negotiation, also known as debt reduction, and credit or debt counseling. Before declaring one should investigate both of these options first. By filling out a form, PayingPaul.Com can match you with a debt relief expert and you can see firsthand if these options are something you can afford or can help given your set of circumstances.
For the some people, bankruptcy is considered a last resort for several reasons:
- First and most importantly, the effects on your credit after declaring bankruptcy can be severe and long lasting. Chapter 7 Bankruptcy can stay on your credit report for up to 10 years, and Chapter 13 Bankruptcy may stay on your credit for up to 7 years. In addition to the effects on your credit score, both can stay on legal records for up to 20 years. With more and more lenders doing serious credit checks, answering "No" to the "Have you ever declared bankruptcy" question can be considered fraud. Not to mention the fact that many employers now want to do background checks before offering someone a job. (Whether you would want to work for someone that cares whether you filed bankruptcy 15 years ago is another story!)
- Another case of why many people seek alternatives to bankruptcy is for purely emotional reasons---they don't want to feel guilty or like a failure. Although many people are motivated by this, it is a completely irrational train of thought and should never be the justification for any path you take. Although honorable and commendable, you must remember that the credit card companies will not choose their path for emotional reasons, and therefore, neither should you. If you don't have the income to pay back your debt, declaring bankrupt is ultimately the right decision, and by resolving your situation, you are being honorable.
If you are interested in learning whether a debt management option is a better choice than bankruptcy, simply fill out a form for free debt advice from an expert today!
Can I File?
As most already know, new bankruptcy laws were legislated in 2005 that made filing much more difficult. Although the reforms have made consumer bankruptcy much stricter in terms of qualification, most people can still declare. The main difference between the old and new law is more consumers are now being forced to file Chapter 13 Bankruptcy instead of Chapter 7 Bankruptcy. In a Chapter 13 plan, a debtor is forced to turn over their disposable income over the courts for up to five years. In other words, some or all of the debt will be paid and your credit is still damaged severely, which makes it a far from ideal solution. In order to qualify for Chapter 7 Bankruptcy, here are the main criteria:
- Your income matters - If your income is above the median income in your state for your household size, then it is possible you will be forced into a Chapter 13 "debt consolidation" bankruptcy.
- The types of debt you have matter - Student loans, fines, penalties, delinquent taxes, child support, alimony, and fraudulent debts are all non-dischargeable (in most cases).
- Whether you filed bankruptcy before matters - If you filed Chapter 7 within the last eight years you will most likely not be eligible. The same goes if you filed Chapter 13 within the last six years.
- Whether your creditors can prove you defrauded them - If the creditors can show that you never had any intention of paying them back, you can be denied relief under bankruptcy. Making this case is relatively easy for the credit card companies if 1) you bought a bunch of big ticket items 70 days or less prior to declaring; 2) you took out a cash advance of more than $825 90 days or less prior to filing; 3) you lied on a credit application; and 3) you concealed, destroyed, or gave or sold for less than its value some of your non-exempt assets to your friends or family in the year prior to filing
- Whether you had a previous bankruptcy case dismissed - If you tried filing within the past 180 days and the case was dismissed, you may not be able to qualify.
How Do You Declare Bankruptcy
How to go about declaring bankruptcy is the same for both Chapter 7 and Chapter 13. First, you must have a mandatory credit counseling session) with a court-approved agency to determine whether your problem is one that does in fact necessitate filing or whether budgeting help or a third-party debt management agency can better serve your needs. Once this is completed, you will receive a certificate showing that you have in fact taken this step. Next, you must file several forms at your local courthouse. In order to complete these bankruptcy forms you will need 1) income information from the past six months, 2) information about your debts, 3) information about your property and assets , and if this applies, 4) any information about your residency in the past 6 months.
Not sold on bankruptcy? Let PayingPaul.Com match you with a leading provider of debt help online. All you have to do is fill out a form and representative will contact you within 24 hours to discuss what debt relief options are available to you and how much they will cost. It's that simple. Start today!