The idea of filing for bankruptcy can be scary and confusing. It is not a decision to enter into without the proper information. You may have seen an advertisement for a Los Angeles bankruptcy attorney on television or on a website, and the idea of paying a few lawyer fees and having your debt wiped out may seem like magic. But before you decide to file for bankruptcy, you should educate your self about the process, and gain an understanding of what bankruptcy actually means. Here are some things to consider when deciding whether bankruptcy is the right decision for you.
Types of Bankruptcy
The two types of bankruptcy that are of concern to individuals are Chapter 7 and Chapter 13, although there are several other chapters, such as Chapter 11 (used by businesses) and Chapter 12 (available to family farmers and fisherman).
Chapter 13 bankruptcy does not wipe out debt, but puts the debtor on a court-approved payment plan, allowing them to rehabilitate their financial situation under terms that the court believes are within their means.
In Chapter 7 bankruptcy, most unsecured debt (such as credit card debt) is liquidated. Many types of unsecured debt, however, cannot be discharged through Chapter 7. Some of these types of debt are:
Child Support
Spousal Support
Most Student Loans
Property Taxes
Income tax going back less than 3 years
Effect on Credit Score
Bankruptcy does indeed stay on your credit report for up to ten years, which is definitely something to consider when deciding to file. However, in most cases, once bankruptcy becomes a realistic option, the individual's credit score is already ruined. If paying off your debts one by one is a possibility, or if several of your debts may fall off of your credit report in the near future, perhaps bankruptcy would indeed have an unnecessary negative effect on your credit score. However, by the time most people begin seriously considering bankruptcy, the effect on the credit score is of minimal importance.
Bankruptcy Abuse Prevention and Consumer Protection Act
This legislation went into effect in October 2005, changing some of the terms of filing for bankruptcy. In current bankruptcy proceedings, a means test is applied to determine whether the income of the person who is filing is low enough in proportion of their debt for them to qualify. This is based on a median income determined for each state. Another stipulation implemented by BAPCPA is that before filing for bankruptcy, the individual must meet with a non-profit debt counselor to discuss other ways of dealing with their debt. They must have a form signed by the counselor indicating that this session occurred.
Other Methods of Filing
Contacting bankruptcy lawyers is not the only option you have for filing. You may download the federal bankruptcy forms and fill them out yourself, although this option is not advisable unless you have an in-depth knowledge of bankruptcy laws. There is also bankruptcy software available, which works much like tax-prep software in that it guides you through the filing process. You can also use a full-service online preparer, although this person is not an attorney and cannot offer legal advice. They simply prepare the forms for you.
It costs $300 to file, and attorneys generally charge $1-2,000 in fees. Although you should do as much research as possible, and not enter into the decision lightly, it may be that bankruptcy is the best choice for you. If that is the case, it definitely may be worth the fee to have the guidance of an attorney. Explore all possibilities before making your decision. - 29866
Types of Bankruptcy
The two types of bankruptcy that are of concern to individuals are Chapter 7 and Chapter 13, although there are several other chapters, such as Chapter 11 (used by businesses) and Chapter 12 (available to family farmers and fisherman).
Chapter 13 bankruptcy does not wipe out debt, but puts the debtor on a court-approved payment plan, allowing them to rehabilitate their financial situation under terms that the court believes are within their means.
In Chapter 7 bankruptcy, most unsecured debt (such as credit card debt) is liquidated. Many types of unsecured debt, however, cannot be discharged through Chapter 7. Some of these types of debt are:
Child Support
Spousal Support
Most Student Loans
Property Taxes
Income tax going back less than 3 years
Effect on Credit Score
Bankruptcy does indeed stay on your credit report for up to ten years, which is definitely something to consider when deciding to file. However, in most cases, once bankruptcy becomes a realistic option, the individual's credit score is already ruined. If paying off your debts one by one is a possibility, or if several of your debts may fall off of your credit report in the near future, perhaps bankruptcy would indeed have an unnecessary negative effect on your credit score. However, by the time most people begin seriously considering bankruptcy, the effect on the credit score is of minimal importance.
Bankruptcy Abuse Prevention and Consumer Protection Act
This legislation went into effect in October 2005, changing some of the terms of filing for bankruptcy. In current bankruptcy proceedings, a means test is applied to determine whether the income of the person who is filing is low enough in proportion of their debt for them to qualify. This is based on a median income determined for each state. Another stipulation implemented by BAPCPA is that before filing for bankruptcy, the individual must meet with a non-profit debt counselor to discuss other ways of dealing with their debt. They must have a form signed by the counselor indicating that this session occurred.
Other Methods of Filing
Contacting bankruptcy lawyers is not the only option you have for filing. You may download the federal bankruptcy forms and fill them out yourself, although this option is not advisable unless you have an in-depth knowledge of bankruptcy laws. There is also bankruptcy software available, which works much like tax-prep software in that it guides you through the filing process. You can also use a full-service online preparer, although this person is not an attorney and cannot offer legal advice. They simply prepare the forms for you.
It costs $300 to file, and attorneys generally charge $1-2,000 in fees. Although you should do as much research as possible, and not enter into the decision lightly, it may be that bankruptcy is the best choice for you. If that is the case, it definitely may be worth the fee to have the guidance of an attorney. Explore all possibilities before making your decision. - 29866
About the Author:
Looking for the assistance of a Los Angeles Bankruptcy Attorney? There's valuable information regarding the loopholes of bankruptcy and what is best for your situation. Make sure you talk to bankruptcy lawyers before it gets too late!
