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Check Your Options Before Filing Personal Bankruptcy

Jan 1, 2008
Personal bankruptcy is something that many people start to consider when they discover that they are drowning in debt. It is not a decision that most people make lightly and some are even embarrassed about the possible necessity of taking such a drastic step, even though the records show that the majority of people who file for personal bankruptcy do not do so due to financial mismanagement, but due to things outside of their control such as divorce, unexpected medical expenses, job loss, etc.

You should gain an understanding of what options are available to you. For personal bankruptcy, you can either file Chapter 7 or Chapter 13, each of which is a slightly different approach. Each method works differently and the right method to use is based on your specific situation, and is dependant on a large variety of factors.

For someone who is not familiar with bankruptcy, it may seem that the process is as simple as filling in a few forms and submitting them. That may have been somewhat true in past years, but with the recent major changes in bankruptcy law, that is no longer the case. In fact, the process of filing bankruptcy is no longer a do-it-yourself process and is quite complicated, where if you attempt it yourself, chances are better than excellent that you will miss a step or fill something out incorrectly, which will cause you to go back to the very beginning and start over. The use of a good bankruptcy lawyer can more than pay for the expense involved in terms of the time involved and the proper filing of forms, not to mention possible assets that you could retain after it is completed.

You should also be aware of the type of debt that you have when you are considering personal bankruptcy, since there are certain types of debts that cannot be discharged via bankruptcy, such as student loans, recent credit card charges, and several other things. So if this type of debt is a major portion of your indebtedness, you need to realize that those items will still exist after you have filed.

It may seem that personal bankruptcy is an outstanding method to just wipe your financial slate clean and start over, it really is not as simple as that. It can take months for your bankruptcy to be approved, regardless of whether Chapter 7 or Chapter 13 is the better method for you to use. In addition, a federal bankruptcy judge needs to approve your filing, and there is a chance that you will not even be able to file, since bankruptcy is no longer automatically approved as it once was.

You will need to plan to attend credit counseling seminars from a court-approved agency as part of the filing process. This is a new requirement which is part of the recent major changes in the bankruptcy laws. The fact that your filing is not due to financial mismanagement is immaterial, this is still a requirement.

This is not something you want to enter into until you have considered all of your other options. The reason for this is because a bankruptcy filing will show up as a huge flag on your credit report for the next seven to ten years, and it will be more difficult for you to get credit cards, personal loans, a mortgage, and even employment with that huge blemish on your credit report.

In the world today, being in debt is almost a way of life. But in life, things happen that cannot be foreseen and sometimes bankruptcy is your best option. Ensure that you have investigated all possible alternatives before filing since there are frequently options that are better suited to your situation which do not involve the drastic step of bankruptcy.
About the Author
Jay Anderson writes financial articles based on his expertise and advises clients about bankruptcy. For more personal bankruptcy insights about Personal Bankruptcy as well as getting a free bankruptcy evaluation from a qualified attorney local to you, visit http://www.bankruptcy-data.com
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