Credit World

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.

One benefit of counselling is that the individual may find a suitable alternative to bankruptcy that they can implement instead.

The most common bankruptcy types are what are referred to as chapter 7 and chapter 13 bankruptcy.

Although it involves the liquidation of almost all personal assets, including your residence if you own it, chapter 7 bankruptcy is often the preferred way to file.

Should any debt still exist after selling all relevant possessions, this is cancelled, allowing a completely clean slate – however, some debt, such as tax, cannot be written off.

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.

Some individuals file for chapter 7, despite having sufficient income to enter into a chapter 13 repayment plan. To ensure that repayment is made when ever possible, the legislation introduced in 2005 requires all applicants for chapter 7 to complete a means test

Not hiring a lawyer is a false economy. You will need help to fill in your details for the BAPCPA’s means test and a lawyer will help decide the most advantageous form of bankruptcy to file under.

“Automatic Stay” is automatically introduced, meaning that any creditors have to deal with your lawyer and may no longer approach you directly for payment of any monies owed to them, once a lawyer is appointed.

Your lawyer will reuire you to make lists of both money you owe, and assets you own, which are later reviewed at a creditor’s meeting at which time the veracity of your financial position is examined and you are recorded answering questions on oath.

The court decides, in a chapter 7 filing, the assets to be sold and the proceeds distributed amongst your creditors, any remaining debt is then written off and you are no longer liable, resulting in a clean financial slate.

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.

If you are wondering how to claim bankruptcy, I recommend have a look at www.howtoclaimbankruptcy.net for more free information, including advice on how to restore your credit score after bankruptcy has been completed. Click here to get your own unique version of this article with free reprint rights.

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