Bankruptcy Filing – A Convenient Option To Overcome Debt Crisis

No matter how challenging it is to cope with a severe debt crisis, appropriate advice and guidance from a reliable source can help you immensely. During times when you are too overwhelmed and confused with your monetary problems, a knowledgeable attorney can provide proper guidance regarding the course of action that needs to be followed. There are actually several debt solutions available for individuals facing financial trouble. The right one, of course, has to be chosen in accordance with individual financial situations, requirements and conveniences.

Bankruptcy, among the various debt solutions, is one of the most common and significant one. For individuals who are incapable of paying off heavy debt amounts, a bankruptcy filing can be a convenient option. Though there can be various negative impacts of this particular process, individuals can sometimes benefit immensely by opting for it in certain circumstances. Let us discuss is brief some of the advantages of choosing it as a debt solution:

The moment an individual is declared bankrupt; their creditors are immediately notified and instructed by the court to stop all direct contacts with them. This relieves the debtors from the constant harassments made by the lenders for the money.
Once an individual files for bankruptcy, all their credit cards and bank accounts gets closed, which can undoubtedly be intimidating for most people. However, by clearing all past financial records, it surely makes way for a new beginning.
A court order known as automatic stay, which becomes effective, the instant an individual files for bankruptcy helps immensely in dealing with foreclosure. It helps in putting off the foreclosure either permanently or for a definite time span.

In case bankruptcy is the most suitable option in your situation, there is certain information that you must have:

It can either be filed in the court by the debtor readily in order to obtain relief from the debt burden, or can also be filed by the creditors to declare the debtor as bankrupt. Once the petition is accepted, the court acts as a medium between an individual and their creditors, thereby providing the debtors an opportunity to make a new beginning, and make payments with as much convenience as possible.
It is a compulsory rule for individuals to complete a credit counseling course, and submit the completion certificate with the court during bankruptcy filing. This course has to be completed under the guidance of a licensed credit counselor.
Completing a means test is also essential for a successful filing in order to prove that an individual’s annual income is not more that the median income for their family size in their state.
For personal bankruptcy, an individual need to provide the court with certain essential documents such as a list of their creditors, information on current income and personal expenditures and photo identification. Other documents that need to be submitted include bank records, a copy of a paycheck, a pay stub, rental agreements and all other documents received by individuals as proof of their income and expenditures during the last six months prior to the bankruptcy filing.

There are various forms of bankruptcies that have to be chosen on the basis of individual financial circumstances.

How Filing For Bankruptcy Affects Your Credit Score

Those who consider filing for bankruptcy have numerous questions regarding their future, and they wonder if they’re making the right decision for their particular situation. First of all, once a bankruptcy appears on your credit report, it’ll remain there for 10 years. While you might be able to achieve some amount of credit, because you declared a bankruptcy, it’ll negatively impact your overall credit score with the 3 major credit bureaus.

One question in particular that’s uppermost in the minds of those who declare bankruptcy, is their ability to obtain additional credit cards down the road, as well as what their credit rating is for buying a home or any other big purchase. If a person owes thousands of dollars on a credit card, it must be listed on their bankruptcy forms as a debt. These forms are filed under penalty of perjury and if fraud is detected, the bankruptcy process will come to a screeching halt.

Perjury is a federal crime, and you’ll end up having to pay a hefty fine or doing a number of years in prison, if you willing and knowingly falsify any documents that you submit in your bankruptcy case. The Internal Revenue Service takes bankruptcy fraud very seriously, and will prosecute those who commit it to the fullest extent of the law. They have enormous resources at their disposal, and can track down anyone, anywhere regardless of who they are or where they hide.

As for your credit cards, you won’t have to list them on your bankruptcy forms as debts unless you’ve made purchases with them. So it’s up to you whether or not you choose to keep or discard them. If you decide to retain them, you may not have them in your possession very long because your particular credit card company might decide to cancel them as a precautionary measure, since you’ve proven that you can’t manage your spending habits.

While a person can still obtain a credit card even after filing a recent bankruptcy, their credit limit – if the person gets one – will be very low. In addition, the person can expect to pay exorbitant interest rates because (s)he is a much higher risk.

Those particular type credit cards should be avoided entirely, because you’ve proven your inability to manage them properly. The best credit card for someone who has recently filed for bankruptcy is a secure card, and many banks offer them. The way they usually work is you deposit a certain dollar amount, say $200, into an account, and that $200 is your credit limit.

If you use your secure card responsibly, after a period of time, the bank may offer you a regular Visa or MasterCard with a low credit limit at first. As you prove yourself over time by handling your new credit card responsibly, your credit limit and credit score will increase accordingly.

There are those who believe that if you declare bankruptcy, you won’t be able to obtain a loan for a down payment on a home for at least the next ten years. This is simply not true. Usually after only two years, you should be able to qualify for a loan. Even though the bankruptcy filing will remain on your credit report for 10 years, lending institutions will take into account how responsibly you’ve handled your financial affairs since you filed. If they feel you’ve done well, they’ll more than likely offer you a loan based upon your good faith and credit.

Compulsory Rules Made By Bankruptcy Courts For Making Bankruptcy Petitions

There are various debt solutions that can help individuals and organizations overcome disturbing financial difficulties. Based on the financial situations, people need to decide on the solution that’s more ideal for them. Bankruptcy is a legal procedure used by individuals and organizations to declare their incapability to pay off debts. Bankruptcy is one of the most significant debt solutions that can help individuals clear their debt burdens in a methodical way.

Personal bankruptcy is an option available for individuals to legally declare their inability to make debt payments. There are two types of personal bankruptcies, to cater to the needs of different debt situations, namely, chapter 7 bankruptcy and chapter 13 bankruptcy. Chapter 7 bankruptcy is ideal for individuals possessing non-exempt assets. The court takes hold of these assets to make debt payments to the creditors. Chapter 13 bankruptcy, on the other hand is a convenient option for individuals who make a decent income in spite of their severe financial difficulties.

Let us discuss in brief the various rules made by bankruptcy courts to enable you to make an effective petition for personal bankruptcy.

To file for personal bankruptcy, it is compulsory for individuals to submit documents that prove their annual income and monthly expenditures. Some of these documents include a list of creditors, proof of current personal expenditures, photo identification, copy of paychecks, bank records, a pay stub, rental agreements and all other documents proving the income during the last six months prior to the bankruptcy filing. Apart from these tax returns and transcripts from the last 4 years are also required to be submitted.
It has been made a compulsory rule of the court for individuals to complete a credit counseling course before the bankruptcy filing. The course must be completed under a certified credit counselor and the certificate must be presented at the court during the filing.
It is also compulsory to pass a means test to prove that you are actually eligible for bankruptcy filing. The means test is required to prove that an individual’s annual income is not more than the median income for the size of their family in their state.
Once the filing is complete, bankruptcy courts demand individuals to complete a course on Personal Financial Management. Courts have the right to shut down a case if they find out that an individual has submitted the Certificate of Completion without actually completing the course.
The court allows individuals to file for bankruptcy as often as their financial situation requires. However, it is required to maintain a definite time gap between two consecutive petitions in some cases. For example, an individual can file for chapter 13 bankruptcy without maintaining any time gap between two filings in a row. But in case an individual has filed for chapter 7 bankruptcy once, they need to maintain an interval of at least 8 years before they can make another petition.

A knowledgeable attorney can provide necessary information on all the important rules made by bankruptcy courts for successful and effective bankruptcy filing.