Fresh Start with Bankruptcy
Check out our debt relief directory and get a free bankruptcy evalution that will stop creditor harassment and offer you a fresh start. The new bankruptcy laws saw many changes, so if you are researching debt relief, look to Bankruptcy Attorney Nation find the best lawyer in your neighborhood.
The goal of federal bankruptcy is to provide an honest debtor that has simply gotten overwhelmed with debt a fresh start. Once you file the petition for bankruptcy, the case is commenced. In addition to filing the petition for bankruptcy, you must also file a statement of your assets and liabilities and schedules listing your creditors. Specific exemptions available under state law determine what property you can keep.
A bankruptcy protects consumers against lawsuit from creditors, and a chapter 7 bankruptcy will liquidate all your unsecured debt. However, it won't do anything for any debts you have that are secured by collateral (e.g., auto or home). If more of your debt is secured than unsecured, you should consider a chapter 13, which will allow you 3-5 years to get your debts paid.
Bankruptcy should be your last resort.
A bankruptcy should be an absolute last resort for resolving your financial difficulty because it destroys your credit, generates a public record on you and stays on your credit report for up to 10 years. Plus the bankruptcy laws passed in 2005 make filing for bankruptcy more difficult, more time-consuming and more expensive.
You have to meet certain income criteria established by the Internal Revenue Service (IRS) in order to qualify for a chapter 7 bankruptcy. If you don't meet these criteria, you'll have to file under chapter 13. Plus, anyone filing for bankruptcy has to undergo mandatory counseling, which takes about 6 months. While undergoing counseling, you do not fall under bankruptcy protection, so creditors and collectors can still pursue collection actions on you, including lawsuits, wage garnishments and foreclosure (if you're behind on your mortgage payments).
Explore bankruptcy alternatives before filing.
Determine how long it will take to pay off your credit cards if you do nothing. Then, explore bankruptcy alternative solutions including debt counseling services or out-of-court debt settlement with your creditors. With lending standards being so strict, you probably wouldn't qualify for a debt consolidation loan, which is why we don't suggest it.
If you decide on a debt settlement, also known as debt negotiation or a debt-workout program, you may be able to get the creditor to re-age your account. This is legal. A creditor is allowed to re-age an account in a workout program once every five years.
"We're trying not to be unduly harsh on consumers, but we want banks to accurately reflect delinquencies on their books," says David Adkins, a supervisory financial analyst at the Federal Reserve Board.
A debt work-out program is one where you agree to pay less than what you actually owe. The damage inflicted is less than what would be inflicted by a bankruptcy. But, if you are able to get your account re-aged to where it reflects that you are current, there would be a reversal of damage, because derogatory information would be removed.
If you're truly committed to making on-time payments going forward, feel free to contact your creditor and ask about curing or re-aging programs. Briefly explain why you fell behind on payments and why you'll be able to pay on time from now on. If the creditor agrees to curing or re-aging, get the agreement in writing before making any payments.
"I can't tell you how many times I've talked to consumers who were promised something by creditors that never came to pass," says David Gelinas, president of Family Debt Arbitration and Counseling Services in Candia , NH . "You hope to get it in writing so you'll have something to show if it isn't fixed." |
