People who are stuck in serious debt problems often think about bankruptcy as the best solution. Yet in many cases, there are better alternatives to bankruptcy. So before submitting a bankruptcy application, consider the pros and cons of your decision.
Changes in the Bankruptcy Law
The government has imposed changes on the bankruptcy procedures to make sure that only those eligible can be discharged from debts. In the past, anyone can apply for bankruptcy without prerequisites. Today, it is a must to complete a credit counseling course prior to filing.
The credit counseling agency accredited by the government will recommend whether or not bankruptcy is an option. If alternative solutions are available, the credit counselor will advise the borrower as to how to manage their debt repayment and finances.
Bankruptcy Filing Procedures
If you are qualified to file for bankruptcy, what should you do? Does it mean you need to give up all your assets? Are there properties that can be exempted from repossession? he government has made provisions for people with extreme debt problems. Before taking any step, it is best to hire the assistance of a bankruptcy attorney.
Preparing your bankruptcy application can be a complicated process. You will be required to provide the details about your investments, savings accounts, insurances, assets, etc. If you’e not familiar with the terminologies of bankruptcy, providing the wrong information in your application can result to delays or even rejection.
Pensions and the IRA are exempted from bankruptcy. College funds or educational funds for your children are also protected. Usually, if the borrower owes more than 80% outstanding balance on mortgage, he or she will be allowed to keep the home. Vehicles with a value of less than $2000 and bank savings worth less than $2000 can be kept as well.
The Income Means Test
The Income means test is used to determine which type of bankruptcy the applicant is eligible for. Chapter 7 bankruptcy discharges the borrower from all debts or repayment obligations while Chapter 13 puts the borrower under a mandatory repayment plan which can last for 5 years. This means, a certain portion of the borrower’s monthly salary will be automatically deducted as repayment for his/her debts.