Filing bankruptcy- A general overview

Posted on | Sunday, October 24, 2010 | No Comments

After the recession and liquidity crunch of 2007, a huge number of home owners are finding themselves knee deep in debt. Inflation and the gloomy economy have affected the debtors very much and in order to avoid too much debt, many are thinking of bankruptcy, if other debt relief options are not working for them. Bankruptcy filings are at an all time high. If you are one of them, and want to know ‘how to file bankruptcy’, this article will provide you with the essential details.

Bankruptcy laws

As filing for bankruptcy was rampant, the New Federal Bankruptcy Laws were introduced to have a check on the number of debtors filing bankruptcy. So, the norms pertaining to file bankruptcy have been made a bit stringent.

As per the new bankruptcy law, which came into effect from 17th October, 2005, it is mandatory to take a credit counselling session, prior to filing for bankruptcy. The credit counsellor should be approved by the US Trustee. It is better to consult and take help of a reliable bankruptcy lawyer, to make the process simplified.

Bankruptcy filing requirements

If you want to file a Chapter 7 bankruptcy, you need to meet the following requirements:

• You have to pass the Means Test. This test is taken to determine whether or not you have any mean to repay your debt. If it is declared that you have no other option to pay your creditors, but, have enough money to live on reasonable, you can file for Chapter 7.

• Your non-exempt property, like, jewellery, antique collections, expensive vehicle, second home, etc, will be turned over to a trustee, who will sell it and pay off a portion of your dues.

For filing Chapter 13 bankruptcy, you need to meet the following requirements:

• You should have undergone credit counselling from an approved credit counsellor, 180 days before filing.

• Your secured debts must not be over $1,010,650 and unsecured debts must be less than $336,900.

• You should not fail to appear before the court during the last 180 days.

Filing bankruptcy

If you want to know, ‘how to file bankruptcy’, you should follow the steps mentioned below:

• You need to consult an attorney.

• You should decide on the type of bankruptcy you would opt for.

• You should make detailed list of all your debts and assets

• You should appear for the Means Test

• You should fill out the bankruptcy form and deliver it to the bankruptcy court.

When you are gaining knowledge on the process of how to file bankruptcy, you also have to bear in mind that you have to bear the cost of filing bankruptcy. Bankruptcy damages your credit rating a lot and stays in your credit report for 7 to 10 years. So, it is advisable to opt for bankruptcy, if you have no other debt relief option.

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