Filing Personal Bankruptcy Help

Every day, more and more Americans slip into debt, and many will file for bankruptcy. As you may know, declaring bankruptcy is the most intense of all financial makeovers. Most of your debts will be absolved, but financial experts continually warn us that it should be treated as a last resort. When you file for bankruptcy, you might as well get a big rubber stamp that says “Don’t Give Me Credit!” and slam it on your credit report for the next ten years. It may seem like a good idea now, but in the future, when you find that your ability to obtain a car, living environment or even employment may be greatly hindered, it may not seem so great. So, it is absolutely imperative that if you are planning to declare bankruptcy, know what you are doing, and have a good game plan.

Basically, there are five chapters of bankruptcy that you can file for, chapter seven being the most common. What will happen when you file Chapter Seven is that a trustee will be appointed to handle your finances. This trustee is like the middle man between you and the businesses or people you owe money to. They will collect any of your property that is deemed up for grabs (non-exempt property), and then they will sell this and distribute the proceeds to the creditors you owe money to. Chapter Nine bankruptcy is available only to municipalities, and since municipalities are municipalities this bankruptcy is more of a form of reorganization, not liquidation.

Chapter Eleven, Twelve and Thirteen bankruptcies are also available. These get a bit more involved due to the fact that instead of liquidation, the debtor is permitted to keep some or all of her property while she uses her future earnings to pay off the debt. Individuals can file for Chapter Thirteen, while Chapter Eleven is mostly for businesses. Chapter Twelve is similar to Thirteen but is more rare on account of the fact that it is only available to “family fishermen” or “family farmers” only in particular situations.

So, now that all of that is out of the way, if you are considering declaring bankruptcy, here is a list of things NOT to do:

We’ll begin with the most obvious. Once you have made the choice to declare bankruptcy, don’t use your credit cards anymore. It may seem like a genius move at first, but it is just not a good idea to recklessly incur more debt that you do not intend to repay. Keep in mind if you take on a huge amount of debt and then suddenly file for bankruptcy, that makes you look mighty suspicious, and creditors don’t like to play the dummy: you could lose your right to cancel out the debt in the bankruptcy. Actually, in 2005, a series of bankruptcy reforms lowered the threshold on extensive purchases, called “luxury purchases” to five hundred dollars and extended the period where you could be caught for abuse to ninety days before filing. So anything that you buy in this time period will be under extra scrutiny. More DONT’S In Part Two….

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