Personal Bankruptcy

The decision to file for bankruptcy is often one of the hardest choices that a person has to make in his or her  lifetime. Poor planning can often make the process even harder. It goes without saying that filing for bankruptcy should be a last resort, and should only be done when all other methods of satisfying one's financial obligations have been exhausted. However, if your situation has become so severe that you are in danger of foreclosure, garnished wages or repossessions or are facing debts that you are in no position to pay, putting off the inevitable can have devastating consequences. Procrastination can cost you your car, your wages, and even your home. Filing your case in a timely fashion can spare you these losses.

The Bankruptcy Abuse Protection and Consumer Protection Act, passed in 2005 puts much stricter guidelines on personal bankruptcy filings. Some of these guidelines include mandatory debt counseling, income limitations on who can and cannot file, and requiring some debtors in higher income brackets to pay off a portion of their debt before allowing them to file. Depending on the amount of money you have, your current income and your personal circumstances, you may not be allowed to file for Chapter 7, which absolves most of your debts. Instead, you may be forced to file for Chapter 13, which requires you to enter into a payment plan. Before filing, it is important that you speak with someone experienced with the bankruptcy laws so that you will have a better idea of what to expect when you file.

Many people mistakenly believe that filing bankruptcy will “wipe the slate clean" and absolve them of all their financial obligations, but that is not necessarily true all of the time. Even if you file for bankruptcy, you will still need to pay you child support, back taxes, federal student loans or debts incurred as a result of fraud or theft (writing bad checks, for example). If you are not clear on which debts will and will not be discharged, speak with an attorney or reputable credit counselor before filing.

Not being prepared for the hearing. Failing to show up or properly prepare for your hearing will not buy you more time. If you are not present at the time of your hearing, your case could be dismissed, and you will have to re-file at a future date. In addition, you will also be forced to pay court costs. Not having all of the required forms and documents may result in not getting all of your debts included in the bankruptcy, which means that you will still be responsible for them even after you file. It is very important to arrive for the hearing on time and that you bring all of your supporting documentation, including a detailed list of all of your creditors. You will also need to bring a valid photo ID to the hearing.

Having too much money in the bank. This is a time when it is not good to save. When you file for bankruptcy, anything over $200 in most cases will be seized and used to pay your creditors. If you have a significant amount of money in savings, you may want to consider entering into a payment plan or settlement with your creditors before you file for bankruptcy. This may allow you to save some of your money.