What You Need to Know Before You Declare Personal Bankruptcy

Written by Josh Ramos

Tuesday, 21 April 2009 01:58

Before you declare personal bankruptcy, there are a few things you should keep in mind. Personal bankruptcy is a serious financial step which you should not take lightly, and you should always look into other alternatives before filing your request with the bankruptcy court. That's not to say that bankruptcy is not a viable option for many individuals. It just means that you should be careful to make the best decision possible for you and your family.

First of all, you should be aware that Congress passed a new bankruptcy law in 2005 which established some additional restrictions and regulations for chapter seven bankruptcy.

Chapter seven bankruptcy, by the way, is what most people think about when they hear the term bankruptcy. The point of chapter seven is to try and wipe out your debts without any kind of repayment plan. This is probably what most people aim for initially, but choosing the right option for you requires that you speak with a lawyer who can look at your specific circumstances.

The new bankruptcy law established a means test which means that you have to go through a more intense process in which you document your income and expenses. If your income is less than the median income for your state, then this test will not apply to you because it is obvious that you don't make much money.

However, if your income is higher than the median for your state, then you'll have to go through the means test to prove that you really need bankruptcy. In the end, most people that would have qualified before will probably qualify even under the new law.

It simply will create more of a hassle for you and your lawyer, and there are other requirements such as mandatory financial counseling. These obstacles are meant to make it more difficult for you to declare bankruptcy, but they can be navigated with the proper advice.

If you do not pass the means test, you'll have to file chapter 13 bankruptcy which creates a repayment plan for the next 3 to 5 years.

Whatever you decide, make sure that you discuss your case with a good bankruptcy lawyer that can give you insights into how the law applies to your particular set of circumstances.

About the Author:

Don't let the fear of your debt take over your life. Get the facts about bankruptcy and learn how to get control of your debt. To learn more about filing bankruptcy online visit us at http://personalbankruptcyquestions.org

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