Filing Personal Bankruptcy - Important Things To Consider Before You Jump Into Bankruptcy


If you are an individual struggling with a crushing debt burden, then filing personal bankruptcy may be the only option available to you. While there used to be a stigma attached to this difficult decision in the past the sheer number of people filing for relief under the bankruptcy laws over the last five years has made it a more acceptable option.

A decision on filing for bankruptcy is nonetheless, a very difficult one to make and needs a thorough weighing of all options available. With good knowledge about the process and the steps that you need to take, filing may be a smooth process rather than a traumatic one.

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The first step is to know what options are available to you if you have unmanageable debt - you can file for bankruptcy under chapter 13 or chapter 7.

The decision on the chapter of the law for filing personal bankruptcy depends on your monthly income. You will need to undergo a 'Means test' and depending on whether your income is above or below the median income in your state, you may be advised to file under the appropriate provision of the bankruptcy law.

While it is legally permissible for a debtor to opt for filing personal bankruptcy "pro se" or without hiring an attorney, it is not really advisable.

A good bankruptcy lawyer can be an asset in helping you get the most advantageous position in your dealings with the creditors. An attorney can also help you understand your situation and options better, and help you wade through the legal quicksand better.

After filing personal bankruptcy under chapter 7 with a court, a trustee will be appointed to determine your non-exempt assets. While the exempted assets depend on the laws of the state that you reside in, your home equity and essential vehicular assets may be exempted. The trustee will liquidate your assets and pay off your creditors in the order of legal precedence. The sum total of filing for bankruptcy under chapter 7 is that your debts may be waived and you may lose some of your assets in the process of repaying your creditors.

Even if you are not qualified for chapter 7, you may opt for filing personal bankruptcy under chapter 13, in which case your attorney can help draw up an easy repayment schedule with your creditors that may stretch up to 5 years, without any loss of your assets.


Bankruptcy Chapter 13

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