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Bankruptcy Assistance Information

Bankruptcy is a last resort for individuals who have no way to pay their debts. It can help in some circumstances, but there are penalties as well, and it is not a decision to take lightly.

Is It Worth Considering?
For low-income individuals and families, just staying ahead of the monthly bills can be a difficult proposition. Even for those working full-time or holding multiple jobs it can be a struggle to meet all financial obligations. Living in debt or "above our means" has gone from a rarity to the status quo. In many situations it isn't frivolous spending, but purchases and payments necessary to keep the family afloat.

Living within this situation leaves little room for maneuvering when an unexpected financial need occurs, such as the loss of a job, a health issue, or a major car repair. The debt continues to increase, the bills grow from a stack to a mountain, and creditors call wanting payment. It can happen fast and leave a great deal of fear, anxiety and worry in its path.

Bankruptcy is not a one size fits all solution, but it may be an option depending on long term goals and the situation at hand. This article provides basic information on the different types, what can and cannot be claimed, and a summary of the pros and cons. Bankruptcy is a serious matter with serious implications and must be considered deeply before enacting. Should you choose to investigate it further, you need to speak with an attorney in your area.

The Basics
Bankruptcy is when a debtor states that they cannot pay their creditors. It is the only legal way to get rid of financial setbacks. By declaring, you are essentially saying that you cannot pay your debts and see no way to change that.

Chapter 7 - Chapter 7 is a liquidation option. It allows you to keep assets you declare "exempt". Unsecured debts like credit cards, medical bills, etc. are discharged. The reason behind this is to allow you to repay your secured debts like car payments, and a mortgage. This is an option typically used by individuals who have a lower income, high debt and low assets.

Chapter 13 - Chapter 13 is for individuals who are temporarily unable to pay their debts, but want the option to pay them over a longer period of time. In this case a court will allow a repayment plan to be set up. This is an option for individuals wanting a little more time and fearing home foreclosure.

The process of filing is a lengthy and difficult one. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 issued these rules for the protection of consumers who may not understand the long term effects.

Step 1 - Find Legal Counsel - A lawyer is a must in this situation. They will explain the process and provide legal advice. This service is not typically provided for free and will require a payment.

Step 2 - Take Your First Required Class - The Act requires all individuals considering bankruptcy to obtain a counseling certificate. This ensures that consumers are educated about the process.

Step 3 - File for Bankruptcy - Filing will require a court case. This will include questions regarding the filers debt, assets and financial situation. Deals can be negotiated regarding what debts will be wiped clean, what needs to be paid, and how long the payment process will take.

Step 4 - Take Your Second Class - After you have filed you are required to obtain an education certificate. This course shows you how to manage your money, create and maintain a budget and learn how to use credit appropriately.

What Can and Cannot Be Claimed?
There are some debts that cannot be wiped clean. These include:

Child Support
Student Loans
Court Restitution Orders
Criminal Fines

Pros and Cons
Bankruptcy is not a situation to be taken lightly.

Discharges many of your debts
Creditors will be barred from contacting you asking for their money
Financial health may be able to return to normal
May be able to keep personal assets like car, home or other belongings

Stays on credit report for a long time
Higher interest rates on items you may one day buy on credit
Not all debt can be discharged
Opens your finances up for scrutiny
Many lenders, utility companies and even employers check credit history

Bankruptcy can ease a financial strain that one may not be able to overcome otherwise. Many people file for bankruptcy and it is a LEGAL form of financial protection.

If you make the decision to file, remember that you are not alone. Once you have filed, the recovery process will begin. This will be hard work, but it can be done! Bankruptcy can take a difficult financial time, and put it in your past. This allows filers to walk away from that time period, and reflect on changes that can be made for the future. Financial habits can change and credit can be rebuilt. Again, if you believe this could be a solution to consider, contact a professional lawyer for a consultation.