Are you baffled about how
to file bankruptcy? If so, you aren't alone.
In 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act
was implemented to reduce the number of frivolous bankruptcy filings.
Prior to BAPCPA, many Americans were filing Chapter 7 to write-off
thousands of dollars in credit card debt. The new bankruptcy laws put
an end to that practice by requiring debtors to undergo tests to
determine how much debt they can afford to repay.
Learning the intricacies of how
to file bankruptcy generally requires the services of a
bankruptcy lawyer. While hiring an attorney to assist with filing
bankruptcy is not required, few people can complete this task without
legal assistance. Individuals who go through the process without legal
representation could place themselves at risk for having their petition
rejected by the court.
The first step of filing bankruptcy requires
debtors to determine which bankruptcy chapter is best suited for their
needs. Six bankruptcy chapters exist and include: Chapter 7, 9, 11, 12,
13 and 15. Chapters 7 and 13 are used for personal bankruptcy
petitions, while the remaining chapters are used for business.
Chapter 7 is also referred to as "liquidation
bankruptcy" because debtors must relinquish assets to repay outstanding
debts. Not all debts can be discharged under Chapter 7 bankruptcy.
Outstanding child support, delinquent taxes, government funded student
loans, and pending lawsuits are exempt from bankruptcy protection.
Chapter 13 is referred to as "reorganization
bankruptcy" and debtors are required to repay a portion of outstanding
debts. Debtors are allowed to keep assets by establishing a repayment
plan. Chapter 13 repayment plans generally last three to five years.
Payments must be made to the bankruptcy Trustee who will then disburse
payments to creditors.
Debtors filing for personal bankruptcy are
required to undergo the 'means' test; a financial tool used to
determine debtors' income. The means test compares the debtor's income
to their states' median income level. If debtors meet or exceed median
income levels they must file for reorganization. If income is below
median levels, debtors are allowed to file for Chapter 7.
Another element of BAPCPA is debtors are required
to undergo credit counseling through an approved agency. Credit
counseling must occur no more than 180 days prior to filing for
bankruptcy protection.
The majority of people who file for personal
bankruptcy are required to file Chapter 13 and establish a repayment
plan. Approximately 60-percent of debtor's disposable income is
contributed toward repayment of debt.
Debtors are not allowed to take on any new debt
while repaying debts under Chapter 13 repayment plans. The exception is
if debtors face an emergency situation or need to make a major purchase
such as an automobile or college tuition. Major purchases must be
approved by the bankruptcy Trustee.
Chapter 13 payments can place serious financial
restrictions on debtors and cause them to fail
out of bankruptcy. When debtors are unable to adhere to the
repayment plan, creditors can petition the court and request the judge
to dismiss the bankruptcy. When this occurs, the bankruptcy judge can
either allow the debtor to file for Chapter 7 or dismiss the
bankruptcy. When bankruptcy filings are dismissed, debtors lose court
protection and creditors can initiate collection actions, including
foreclosure.
Individuals can obtain complete information
regarding the Bankruptcy Abuse Prevention and Consumer Protection Act
via the U.S. Department of Justice website at usdoj.gov. The U.S.
Trustee Program provides consumers with bankruptcy information, forms,
resources, and approved credit counseling and debt education agencies.
Article Source: http://www.articlesbase.com/
personal-finance-articles/how-to-file-bankruptcy-tips-for-filing-
personal-bankruptcy-to-obtain-financial-relief-1175778.html About the Author
Simon Volkov is a real estate investor who offers
solutions to people facing financial hardships. He specializes in
probate, short sales, foreclosure and helps people understand how
to file bankruptcy. If you are considering filing personal
bankruptcy visit
www.simonvolkov.com
to obtain additional information and resources. | 