Daily Handy Tips

Posts Tagged ‘personal Bankruptcy’

One should always first consider alternatives to bankruptcy.

Credit counselling is now compulsory under the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act, and must be taken within 180 days of filing bankruptcy.

This counselling is intended to make the individual aware of alternatives to filing for bankruptcy.

There are a number of bankruptcy types (called “chapters”), but Chapters 7 and 13 are the most common.

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.

With the exception of certain debt, tax bills for example, any debt outstanding after liquidation of assets is cancelled and the debtor is no longer liable for it.

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.

To ensure that an applicant is being truthful regarding ability to pay their creditors, the 2005 legislation requires a means test to be completed to demonstrate that repayment is not possible, and that chapter 7 is the only viable option.

Given the complexities of filing for bankruptcy, including deciding the best type of bankruptcy to apply for and filling in the initial legal means test, a lawyer is essential.

Appointing a lawyer instantly triggers what is called “automatic stay” and is a form of protection from creditors in that they can thereafter no longer pursue you directly for payment of debts - they have to deal directly with your lawyer.

One of the first things you have to do is supply a list of both debts and personal asets to the court. You will then be recorded answering a series of questions, on oath, at what is called a “Creditors Meeting” where the truth behind your financial submission is verified.

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.

60 days after the 341 meeting, your creditors can challenge the discharge or aspects of it. If no petitions are received by the court, a notice of discharge of debt will follow within a few days under chapter 7. In the case of a chapter 13 filing, notice of discharge is issued 30 - 60 days after the repayment plan has been completed, and verified by the court.

If you are considering how to claim bankruptcy, I strongly advise have a look at www.howtoclaimbankruptcy.net for more free information, including advice on how to restore your credit score after bankruptcy has been discharged. Unique version for reprint here: Feeling The Financial Squeeze? How To Claim Bankruptcy.