Chapter 13

The Benefits of Bankruptcy 1

After the current bankruptcy law went into effect in 2005, many people were left with the impression that bankruptcy relief was no longer available or too difficult to obtain. Nothing could be further from the truth.

The Myths of Bankruptcy 2

Like most formidable situations, bankruptcy has earned its reputation based on very few truthful facts and too many false embellishments. The majority of the myths about bankruptcy have begun since the current bankruptcy laws went into effect in 2005. But have no fear, once you know the facts, filing for bankruptcy is not nearly as terrifying as it first appears. Here are some of the most common myths about bankruptcy and what you need to know before you clean your slate.
Myth #1: It is difficult to file for bankruptcy.

What should I look for in a bankruptcy attorney? 4

You should find out the experience level of your prospective attorney. Ask how many bankruptcy cases they deal with a year and how long have they have practiced bankruptcy law. Additionally, they should be honest, efficient, and have a great reputation.

What are some of the pre-filing mistakes people make? 7

Once someone decides to file for bankruptcy, there are several pitfalls they often fall into. Some decide they want to accumulate debt in hopes of having it restructured in bankruptcy. Others ignore their current situation and pay back family and friends or ignore lawsuits filed against them. Others make the mistake of trying to save money and represent themselves in bankruptcy. Some even aren’t completely honest about their financial situation with their lawyer. All are costly mistakes.

Which type of bankruptcy is right for me? 10

The answer to this question primarily depends on whether or not you would like to keep your home. If you are fine with your home being sold to reconcile your debt with the mortgage company, Chapter 7 is probably the right choice for you. If you would like to remain in your home, then Chapter 13 is your desired filing status.

What are some of the myths of bankruptcy? 13

There are numerous myths that people believe about bankruptcy. These include the belief that they will never be able to borrow money again; that both spouses in a marriage will have to file for bankruptcy; and that it is difficult to file for bankruptcy. Other people wrongly believe that filing for bankruptcy helps their credit rating or that they can only file for bankruptcy once.

Who qualifies for bankruptcy? 16

Qualifying for bankruptcy differs from state to state and is complicated to determine. A means test was recently established to determine who is qualified for what type of bankruptcy. Suffice to say, around 70 percent of people who file for bankruptcy qualifies.

What are the types of bankruptcy? 19

The two types of personal bankruptcy that individuals can file under are Chapter 7 bankruptcy, often called a liquidation plan, and Chapter 13 bankruptcy, often called the debt restructuring plan.

What are the benefits of bankruptcy? 22

The benefits of filing for bankruptcy are numerous. First of all, bankruptcy restructures your debt, making it more manageable. Bankruptcy also offers peace of mind by eliminating the burden of dealing with creditors and the obligation to pay off debts. Moving forward, filing for bankruptcy helps you get a new start and equips you with useful financial skills.

What are my non-bankruptcy options? 25

There are a number of options people have to avoid filing for bankruptcy. First, they can sell assets and restructure living expenses. Other options include home equity debt consolidation loans and credit counseling services. Additionally, they can proactively negotiate payment terms with their creditors.

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