Filing for Bankruptcy

Filing for bankruptcy is a big deal. Most people look at it as the ultimate wrong while others will tell you it's no big deal. The truth is, more and more people are filing for bankruptcy than every before and that is not good.

Whether it's your fault or not, getting into debt that you can't get out of is a big deal. Make sure you understand your options and you know what you are doing before you take any action.

When you should be Filing for Bankruptcy

Filing for bankruptcy should not be taken lightly. It is a big deal and you need to make sure it is right for you in your situation. First of all, bankruptcy is not for the person who:

• Has wracked up $20,000 in credit card debt and doesn't want to pay it.
• Has wracked up any amount of money in any kind of debt form and just doesn't want to pay it.
• Has wracked up any amount of money in any kind of debt form, doesn't want to pay it, has no knowledge or desire for money management, and will probably continue to build up debt after bankruptcy.

Basically what I'm saying is that you should be serious about bettering your situation and not just fixing a mistake, especially if you're just going to continuously repeat the same mistakes.

Even if you have built up debt and are set on changing your spending habits, paying off the debt yourself might be a better idea. If you absolutely can't manage the debt, even if you seriously downgrade your lifestyle, bankruptcy might be the right choice.

Bankruptcy is also common among those who took out a lot of loans for failed businesses or who were caught with low or no health insurance in the case of a medical emergency that required taking out a lot of debt. You really have to be in a tight situation.

Once you know you are going to file for bankruptcy, you need to make sure you are ready.  You don't need a lawyer, but it is highly recommended to make things go more smoothly and to make sure everything goes right.  They can help you out a lot and take away a lot of headache.

You will also need to organize your debt.  You will need to make sure you have it all accounted for, how much you owe to who, etc.  You are going to need to go over this with your lawyer and you're going to need this information in your meeting of creditors.

How to File for Bankruptcy

Now you can actually file.  You will first need to file a petition for bankruptcy.  This is your very first step.  You can have your lawyer do this once you are both ready.  You will then be appointed a trustee who will take care of your case.

You will need to choose between filing chapter 7 or 13 bankruptcy.  With chapter 7, your debts will be liquidated and with 13, your debts will be reorganized which means you will just get help paying, but you'll still have to pay.  Most people are not allowed to file chapter 7 and do 13.

Once you've handed in your petition, you will get automatic stay which means creditors aren’t allowed to contact you anymore.  If you have already filed for bankruptcy, you may or may not get automatic stay again.

Then you will need to attend a meeting of creditors where all your creditors ask you questions that you prepare with your lawyer to make sure you are telling the truth and being honest.  This usually doesn't last long.

Your trustee will then work with you to have you liquidate assets that are easily liquidated to pay for some of the debt and either work through your chapter 7 or 13 bankruptcy.  If any debts are discharged, another way to say you don't have to pay them, the creditors have 60 days to challenge this after which you are clear.

The main alternative to filing for bankruptcy is to pay the debt off on your own.  You could get help with a consolidation agency to make the payments more manageable, but ultimately, you will need to work hard to pay off your debt.

This doesn't sound desirable, but you need to understand that taking out more and more debt you can't afford is not okay.  You need to be responsible for yourself.  You were irresponsible in the past and working to pay off your debt and reorganize your financial life will prove your responsibility.