subject: Feeling The Financial Squeeze? How To Claim Bankruptcy [print this page] Filing for bankruptcy should be a last resort.
Within 180 days of filing for bankruptcy, the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act makes it law that an individual must get some form of credit counselling.
By having counselling, an individual is made aware of the alternatives to bankruptcy, which may be suitable in their case.
Of the many versions of bankruptcy, chapters 7 and 13 are probably the most well known.
Chapter 7 is often regarded as being the best option. The downside is that most all personal assets have to be sold, including any familly home.
However, after all relevant assets have been liquidated, any outstanding debt (there are exceptions, such as tax), is cancelled, allowing a totally fresh start.
Chapter 13 does not require the liquidation of all personal assets. It works differently in that a repayment plan is put in place to repay all creditors over a 3 to 5 year period.
The changes brought in in the 2005 legislation means that all applicants for chapter 7 bankruptcy have to undergo a means test, to ensure that they genuinely cannot work out a repayment plan.
It is very important to hire a lawyer. They will decide which form of bankruptcy is most suitable for you, and help fill in the BAPCPA's means test.
Also, once a lawyer is acting for you, "automatic stay" comes into effect. This means that creditors can no longer approach you for money. All creditors have to deal through your lawyer.
You will be required to draw up a list of debtors and a list of your assets. These will be reviewed at the meeting of creditors (what's called a"341 Meeting"). where you have to answer a series of questions on oath.
Chapter 7 bankruptcy results in a clean financial slate, as any outstanding debt after your assets have been sold and the monies appropriated, is cancelled.
If, after the means test, it is shown that an individual is in a position where full repayment of debt can be made over a 3- 5 year period, a chapter 13 filing is made and a repayment plan introduced.
Under chapter 13, the notice of discharge is served 30-60 days after the repayment plan has been completed and fulfilled. Under chapter 7, creditors can legally challenge the discharge on the 60th day after the meeting of Creditors. If no representations are made, notice of discharge is issued a few days later.
