The idea of filing for bankruptcy can be scary and confusing. It is not a decision to enter into without the proper information. You may have seen an advertisement for a Los Angeles bankruptcy attorney on television or on a website, and the idea of paying a few lawyer fees and having your debt wiped out may seem like magic. But before you decide to file for bankruptcy, you should educate your self about the process, and gain an understanding of what bankruptcy actually means. Here are some things to consider when deciding whether bankruptcy is the right decision for you.
Types of Bankruptcy
There are many different chapters of bankruptcy, including Chapter 11 (used mostly by businesses) and Chapter 12 (open to fisherman and farmers), but the two chapters most commonly filed by individuals are Chapter 13 and Chapter 7.
Chapter 13 bankruptcy does not wipe out debt, but puts the debtor on a court-approved payment plan, allowing them to rehabilitate their financial situation under terms that the court believes are within their means.
In Chapter 7 bankruptcy, most unsecured debt (such as credit card debt) is liquidated. Many types of unsecured debt, however, cannot be discharged through Chapter 7. Some of these types of debt are:
Child Support
Spousal Support
Most Student Loan Debt
Property Taxes
Income taxes less than 3 years old
Effect on Credit Score
The main disadvantage cited when cautioning individuals against bankruptcy of any chapter is that it stays on your credit report for up to ten years. Although this may deter some people, it is important to remember that if you are considering bankruptcy, your credit score is probably in pretty terrible shape as it is. If you think you can pay off your debts individually, or if they are close to falling off of your credit report, then the effect of bankruptcy on your credit score is something to take into serious consideration. However, if you are in a position where your credit score has no chance of improving in the next 10 years anyway, then this is not of much concern.
Bankruptcy Abuse Prevention and Consumer Protection Act
This legislation went into effect in October 2005, changing some of the terms of filing for bankruptcy. In current bankruptcy proceedings, a means test is applied to determine whether the income of the person who is filing is low enough in proportion of their debt for them to qualify. This is based on a median income determined for each state. Another stipulation implemented by BAPCPA is that before filing for bankruptcy, the individual must meet with a non-profit debt counselor to discuss other ways of dealing with their debt. They must have a form signed by the counselor indicating that this session occurred.
Other Methods of Filing
Hiring an attorney is not the only way to file for bankruptcy. Federal bankruptcy forms can be downloaded, and if you are comfortable with your own grasp on bankruptcy laws, filing on your own may be an option. You can also purchase bankruptcy software, which works like the programs available for tax preparation in that it guides you step by step through the filing process. There are companies that offer full service prep online, but they cannot offer any legal advice.
The fees for a bankruptcy attorney are usually between $1,000 and $2,000. The fee to file is about $300. Bankruptcy can be a new beginning, and you may determine that the fees of hiring a lawyer are worth the peace of mind you will gain from having your debt under control. Make sure you educate yourself and stay informed through every step of the process, whatever your decision. - 31380
Types of Bankruptcy
There are many different chapters of bankruptcy, including Chapter 11 (used mostly by businesses) and Chapter 12 (open to fisherman and farmers), but the two chapters most commonly filed by individuals are Chapter 13 and Chapter 7.
Chapter 13 bankruptcy does not wipe out debt, but puts the debtor on a court-approved payment plan, allowing them to rehabilitate their financial situation under terms that the court believes are within their means.
In Chapter 7 bankruptcy, most unsecured debt (such as credit card debt) is liquidated. Many types of unsecured debt, however, cannot be discharged through Chapter 7. Some of these types of debt are:
Child Support
Spousal Support
Most Student Loan Debt
Property Taxes
Income taxes less than 3 years old
Effect on Credit Score
The main disadvantage cited when cautioning individuals against bankruptcy of any chapter is that it stays on your credit report for up to ten years. Although this may deter some people, it is important to remember that if you are considering bankruptcy, your credit score is probably in pretty terrible shape as it is. If you think you can pay off your debts individually, or if they are close to falling off of your credit report, then the effect of bankruptcy on your credit score is something to take into serious consideration. However, if you are in a position where your credit score has no chance of improving in the next 10 years anyway, then this is not of much concern.
Bankruptcy Abuse Prevention and Consumer Protection Act
This legislation went into effect in October 2005, changing some of the terms of filing for bankruptcy. In current bankruptcy proceedings, a means test is applied to determine whether the income of the person who is filing is low enough in proportion of their debt for them to qualify. This is based on a median income determined for each state. Another stipulation implemented by BAPCPA is that before filing for bankruptcy, the individual must meet with a non-profit debt counselor to discuss other ways of dealing with their debt. They must have a form signed by the counselor indicating that this session occurred.
Other Methods of Filing
Hiring an attorney is not the only way to file for bankruptcy. Federal bankruptcy forms can be downloaded, and if you are comfortable with your own grasp on bankruptcy laws, filing on your own may be an option. You can also purchase bankruptcy software, which works like the programs available for tax preparation in that it guides you step by step through the filing process. There are companies that offer full service prep online, but they cannot offer any legal advice.
The fees for a bankruptcy attorney are usually between $1,000 and $2,000. The fee to file is about $300. Bankruptcy can be a new beginning, and you may determine that the fees of hiring a lawyer are worth the peace of mind you will gain from having your debt under control. Make sure you educate yourself and stay informed through every step of the process, whatever your decision. - 31380
About the Author:
Trying to find a Los Angeles Bankruptcy Attorney? You need to know about the various types of bankruptcy and how they'll effect you. Make sure you talk to bankruptcy lawyers soon and find out your options!
