How to survive a bankruptcy filing

Declaring bankruptcy is a drastic step for dealing with financial problems, so it should be the absolute last resort taken when dealing with financial woes. Since the United States Congress enacted the Bankruptcy Abuse and Creditor Protection Act 2005, known as BAPCA, filing bankruptcy continues to be an emotionally difficult choice to make and an even more cumbersome process to withstand. As the debtor, you are required to provide the U.S. Bankruptcy Court with detailed information concerning your income, property, assets, debts and creditors. You also have to provide paycheck stubs and tax returns as well as attend mandatory credit counseling both before filing a bankruptcy and then again before your case is discharged (finalized).

Difficulty: Moderate

Instructions

Before you file

1. Explore financial alternatives to bankruptcy, such as negotiating with creditors to reduce monthly payments or interest rates on the debt, finding a financial manager, refinancing your home if you have some equity in it, or seeking the help of nonprofit credit counseling groups.

2. Consider filing for bankruptcy if you're paying only minimum amounts on your bills, leaving with you a larger balance and late fees each month, you are unable to budget yourself out of debt within five years, you've been notified of foreclosure on mortgages or loans or you've suffered a severe financial setback, such as losing your job.

3. Understand the serious repercussions of filing for bankruptcy. First, a bankruptcy filing remains on your credit record for up to ten years. Secondly, it will take time after your bankruptcy is completed to get any credit. If you do get credit, it will likely be at a higher interest than you would have been given had you not filed bankruptcy. A poor credit rating can make it tough for you to get a mortgage (or result in a higher interest because you are deemed a bad credit risk), to obtain a small business loan or even a car loan.

4. It is very important to understand what debts a bankruptcy filing can't discharge, or dispose of, and what debts will remain, despite your bankruptcy filing. For example, debts that are nearly impossible to get discharged include taxes and student loans. Debts that are generally dischargeable (depending on when you incurred them) include credit card debt and personal loans.

5. While you don't have to hire an attorney to represent you in a bankruptcy filing, the laws are so complicated you would be wise to at least speak with a lawyer before deciding what to do about your situation. However, since the paperwork required for a bankruptcy filing is so complicated, it would be a good idea to hire an experienced bankruptcy lawyer to help guide you through the confusing process.

After your bankruptcy is discharged

6. Open a checking or savings account, and make regular deposits into the account. Future lenders will want to see you are capable of handling your money responsibly, and opening a bank account is one way of demonstrating that.

7. If you are able to get a credit card after your bankruptcy is discharged, and you are certain you won't fall into the same financial trap with a credit card that might have caused you to file a bankruptcy the first time around, go ahead and get it. Obtaining a credit card and paying the entire balance off in full each month is another way of demonstrating to creditors you aren't about to make the same financial mistakes twice. Often, credit cards from gas companies are the easiest to obtain.

Tips & Warnings

• Be incredibly honest on your bankruptcy paperwork, since you complete and sign them under the penalty of perjury. If the bankruptcy court catches you lying on your papers or lying in court, you could be convicted of federal fraud.
• Despite the complexities of filing personal bankruptcy since BAPCA was enacted, it is still designed to give debtors who successfully complete their bankruptcy a fresh financial start.
• If you hire an attorney to represent you in your bankruptcy, they will file your paperwork electronically, meaning online. However, if you don't hire an attorney, you will have to file your paperwork yourself, either in person at the proper bankruptcy court or via the U.S. mail.
• Under BAPCA, attorneys offering bankruptcy and other related financial relief services must now refer to themselves as Debt Relief Agents, or DRAs. They are still attorneys but Congress decided that bankruptcy lawyers must also refer to themselves as DRAs.
• Don't assume your credit report will record your debts declared by bankruptcy. Read it again and make sure--and point out any discrepancies right away to the credit bureau. You'll want a record of debts paid on your credit report to show you've met your financial obligations and are a good credit risk.

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on 3/23/2007 http://www.wefreedebt.com is a great source of information on this subject