Personal bankruptcy filing is on the rise, but many of the people filing have not made informed decisions or looked at alternatives that might be available to them, such as debt consolidation or negotiating with their credit card lenders, for example. Many people may not be aware that due to changes in the bankruptcy laws, Chapter 7 personal bankruptcy or liquidation is much harder to qualify for, especially if you are still working.
There are common sense alternatives to try before filing personal bankruptcy. It is amazing how many people have not stopped their frivolous spending. They have often gotten in this position from making impulsive purchases that they use credit to buy, rather than doing without or only buying things they can pay cash for.
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They have not made up a budget, or cut out cell phones, cable or internet, or looked for other ways to cut expenses from the budget. Personal bankruptcy will not cure this, and they may find a Chapter 13 bankruptcy plan set up by the court where they will be repaying their old bills for the next five years and still need to pay house and car payments that are present bills.
You need to carefully consider your specific financial situation before filing. With the sweeping changes in bankruptcy law, you now must be approved by the court to even be eligible to file, even though in past years anybody could file almost on a whim. It is no longer your choice which chapter to file as this is determined by your specific financial situation and your level of income.
Often, the court will decide to make it a Chapter 13 bankruptcy especially if you still have income, which not only costs you thousands in the bankruptcy filings and proceedings, but additional interest. Many people also don't realize that not only do they still have to repay the debt, but they have now ruined their credit for the next ten years.
In fact, often individuals who are truly bankrupt, those having no assets or income, are judgment proof anyway and may be wasting their money by filing personal bankruptcy. There are others that have still not stopped the impulsive spending habits that put them in the situation to begin with, and will have their money flowing through a trustee, once they have made the bankruptcy filing. By taking steps to save themselves before it is too late, personal bankruptcy might be avoided.
While it is not necessary to hire an attorney for filing personal bankruptcy, it is certainly strongly advisable and an excellent idea to consult one. This is not a time when you can afford to be making further mistakes. Since there have been many changes in the bankruptcy laws, they can help you decide whether it is right for you and help with the documentation. You need to take a bankruptcy evaluation to see if there is another way to work out a repayment plan, that won't ruin your credit on a long term basis, like personal bankruptcy. There are some individuals that have no other options, however.
Personal bankruptcy consists of filing a petition with the court, credit counseling under Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, notifying creditors, the meeting of the creditors and the final discharge. This procedure can take over ninety days and has been ranging from 4 to 6 months. You will definitely want to take a bankruptcy evaluation and consult with an attorney before you ruin your borrowing ability for the next ten years.
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