Five Things You Need to Know About Filing for Bankruptcy
Making the decision to file for bankruptcy is the first step in a series of far reaching changes you are about to make in your life. Filing for bankruptcy is not just a way to get creditors to stop calling you morning noon and night. It’s also a commitment to yourself and your government that you will start to make more thoughtful and responsible decisions when it comes to managing your money. As you begin the process of putting together your required paperwork in order to file for bankruptcy, there are a few things that you need to know:
1. Complete a Pre-Bankruptcy Certification Course
Before you ever file for bankruptcy you must complete a pre-bankruptcy credit counseling course. This 60 to 90 minute course became mandatory for all those people filing for bankruptcy under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). During the course you will learn more about your current financial status and the options available to you through bankruptcy. You will be provided with a list of alternatives to bankruptcy as well as a new personal budgeting plan. Upon completion of the course, you will have earned your credit counseling certification which must be presented to the court when you file for bankruptcy.
2. Know Your Bankruptcy Types
There are two different types of bankruptcy that individuals can file under. The first is called Chapter 7 bankruptcy and it is your most far reaching option. Upon successfully filing for Chapter 7 bankruptcy, all of your eligible debts are discharged and all non-exempt property is given up to your trustee in order to help pay your creditors. The second type is called Chapter 13 bankruptcy – also known as “reorganization”. Under Chapter 13, your court appointed trustee will assist you in re-organizing your debt payment plans and will help you keep your more valuable property such as your home and your car.
3. Know if You Qualify
In order to qualify to file for Chapter 7 bankruptcy, your disposable income must be below a certain level. Your disposable income can accurately be determined by taking an online means test. The online means test works by deducting current monthly expenses from your current monthly income (averaged from the previous 6 months) to determine your disposable income. You will learn more about the online means test during your credit counseling for bankruptcy course.
Do Your Due Dilligence
Your property will be carefully examined during the bankruptcy filing process. Upon filing for Chapter 7 bankruptcy, all non-exempt property will be taken by your trustee and sold to help pay off your creditors. Exempt property includes things like food, furniture, and clothing. It is illegal to give your property to a friend or relative to be given back to you after the bankruptcy process is complete.
5. Know The Long Term Effects
The long term effects of filing for bankruptcy are long lasting and far reaching. Filing for bankruptcy will be on your credit report for 10 years and will affect (but not necessarily eliminate) your ability to borrow money in the future. But if you are filing for bankruptcy due to inability to make debt payments, your credit probably wasn’t very good to begin with.
Before you file for bankruptcy, find a good bankruptcy education provider. One great option is www.startfreshtoday.com. Their pre-bankruptcy credit counseling course is updated regularly so that you will be given all of the most current information available. It’s a great place to start your bankruptcy certification or bankruptcy filing process.
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