Bankruptcy - Is it Your Best Option?

Bankruptcy is perceived by most people as the ultimate failure. Unfortunately, for thousands of Americans, it is the only alternative they have to save their belongings. It stirs up considerable emotion and leaves people feeling ashamed. But it shouldn't.

Bankruptcy can be traced back to the Old Testament and the Moses Laws, which states every fifty years all debts are eliminated. The Hebrew Law of Forgiveness instructs release of debt every seven years. So, why is it in today's society filing bankruptcy makes us feel as if we have committed a sin?

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There are six types of bankruptcy chapters including: Chapter 7, 9, 11, 12, 13 and 15. The two most common include Chapter 7 and 13. Chapter 7 requires the individual filing to turn over their non-exempt property to a Bankruptcy Trustee. The Trustee supervises the sale of property and uses the money to pay outstanding debts.

Chapter 13 bankruptcy allows individuals to keep their property, including homes and vehicles. However, a repayment plan must be approved by a Bankruptcy Judge. If the person fails out of bankruptcy, the creditors can move forward to repossess the property. Payments must be made to a Trustee who oversees the account until all debt has been repaid in full.

Bankruptcy laws changed significantly in 2005. Many people were abusing the system and filing bankruptcy to write off frivolous credit card expenses. The Bankruptcy Abuse Prevention and Consumer Protection Acts require "Americans who have the ability to pay will be required to pay back at least a portion of their debts." Additionally, BAPCPA requires an eight-year waiting period before individuals can file again.

Bankruptcy is governed under Federal United States laws. However, each State abides by their own set of bankruptcy laws. If planning to file bankruptcy, you will need to adhere to the laws of your state. Petitions must be filed in the district where you reside and approved by a district bankruptcy judge.

Whenever possible attempt to work out a repayment plan with your creditors and avoid filing bankruptcy. Depending on your circumstances, creditors may accept less than is owed on your debt or renegotiate your payment terms or interest rate. Increase your chances of successful transaction by offering some money upfront and a reasonable repayment plan.

If bankruptcy is your only option, it's best to retain the services of an attorney who is well-versed in bankruptcy laws. Doing so will ensure the proper documents are filed and improve your chances of having the court approve your request.

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