The Truth About Bankrutpcy
Some would make out bankruptcy to be an easy street to a new beginning. In reality Bankruptcy is a somewhat complex procedure, and even more so with the new bankruptcy laws that went in to effect last year, making it harder for people to abuse filing for Bankruptcy. Many people look at Bankruptcy as a “get out of jail free” card. That could not be any farther from the truth.
Let’s start with describing the two main types of consumer bankruptcies. One is “Chapter 7″, and one is referred to as “Chapter 13″, these reference their respective chapters of the bankruptcy law. Chapter 13 is a reorganization bankruptcy
and Chapter 7 is a liquidation bankruptcy.
In Chapter 7, a debtor surrenders their non-exempt property to a bankruptcy trustee who then liquidates the property and distributes the proceeds to the debtor’s unsecured creditors. If a debtor does not qualify for relief under Chapter 7 of
the Bankruptcy Code, either because of the “means test” or because Chapter 7 does not provide a permanent solution to delinquent payments for secured debts, such as mortgages or vehicle loans, the debtor may still file under Chapter 13 of the Code. Individuals may enter a reorganization bankruptcy in order to retain assets and pay off reduced creditor claims in regular payments for a period of between 3 and 5 years.
Recently there have been some large changes made to the bankruptcy laws. Under the previous rules, most filers could choose the type of bankruptcy that seemed best for them, and most chose Chapter 7 (liquidation) over Chapter 13
(repayment). The new law makes it considerably more difficult for individuals to file for bankruptcy under Chapter 7, under which most of their debts are forgiven (or discharged), as opposed to Chapter 13, under which no debts are forgiven. The new law will also make it more difficult for serial filers to abuse the most generous bankruptcy protections.
The new law adds a number of new requirements for bankruptcy filers making the filing process more difficult and costly. For example all potential bankruptcy filers must now undergo credit counseling via an “approved nonprofit budget and
credit counseling agency” prior to filing for bankruptcy. There is more to filing bankruptcy than simply thinking you will just go see an attorney and all of your debts will be wiped away. It is a myth to think, I’ll just file bankruptcy and start over; it seems so easy. The truth of the matter is that Bankruptcy is a gut-wrenching, life-changing event that can cause lifelong damage to a person’s mental well-being along with their personal finances for a long time. Therefore, think long and hard and make sure you have exhausted all of your other options before deciding that you want or need to file bankruptcy. Bankruptcy is rated up there with some of the most traumatic life altering events such as loss of a loved one, serious illness, divorce and disability. Truly weigh your options before committing to filing for bankruptcy protection.
Talk with a lawyer, and explore your options. Bankruptcy may be the answer, but it may also not be the answer. When seeing a lawyer, check out this site, make sure the lawyer you select is skilled and has experience in bankruptcy and credit issues. If you are located in Connecticut, I highly suggest that you call Greg Arcaro at Brown, Paindiris and Scott, (860) 659-0700.
