Bankruptcy filings have increased over the years. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 tried to put a halt to the random bankruptcy filings. The New Federal bankruptcy Law came into effect on 17th October 2005. If bankruptcy is the only option you are left with, there is no need to panic as declaring yourself bankrupt doesn’t mean that you can’t recover financially. You may not be getting credit as per favorable terms but there is ample opportunity to repair your credit rating again. Many creditors/lenders view filing for bankruptcy as your earnest effort to get out of debt.
Chapter7 or Chapter 13 bankruptcy
You can either file for Chapter 7 bankruptcy or Chapter 13 bankruptcy. It depends which one you qualify for. If you have no cash left to pay off your debts, you can file for Chapter 7 bankruptcy.
Take the Means Test
As per the New Federal Bankruptcy Law, you have to take a Means Test. Your income is calculated and compared to the median income of a similar household in the state. In case you don’t qualify for Chapter 7, you can file Chapter 13 bankruptcy.
Liquidation of non-exempt assets
In Chapter 7 bankruptcy, your non-exempt assets are liquidated to repay your creditors. Your non-exempt assets should have enough equity. Bankruptcy laws have been formulated keeping in mind the interest of not only the debtors but also the creditors.
A new repayment plan
When you file Chapter 13 bankruptcy, you should give documentary evidence that your income will enable you to repay debts if you are given a new repayment plan. In Chapter 13 bankruptcy, your assets are not liquidated. If you are following the new repayment plan, you get out of debt within a span of 3 to 5 years.
It is always better to have a bankruptcy attorney by your side. The bankruptcy lawyer is aware of all the legal aspects of the federal court proceeding and can guide you accordingly.
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