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Filing Bankruptcy

Filing bankruptcy or not is a major decision that should not be taken lightly. On the contrary, the issue often requires a help of a professional bankruptcy attorney. Here we provided some general information that would help you make your decision. However, this should not be assumed as a substitute for legal counsel.

Simply put, bankruptcy is a legal procedure that allows you to get rid of you debts. Long ago, bankruptcy was considered something shameful, and the debtor used to be strictly penalized. Today, there is bankruptcy law, which favors debtors in distress and helps them overcome their difficulties and get a “fresh start”.

There are two basic questions you should answer to decide about going bankrupt: will bankruptcy wipe out enough of debts to make it worth? And if so, will you have to give up the property you want to keep? So, it's all about the effectiveness of the procedure for you particular case.

United States Bankruptcy Code provides 5 different kinds of bankruptcy. Most common of them are Chapters 7, Chapter 11 and Chapter 13. First thing you need to do is decide what chapter you are going to file under.

Chapter 7, referred to as liquidation, or “straight” bankruptcy, is suitable for both individuals and businesses, and releases the debtor of responsibility for most debts; in exchange all property of the debtor, except exemption available to individuals only, is surrendered and sold to paid creditors. The procedure usually takes up to 6 months.

Individual who has stable income and whose unsecured debts do not exceed $269,250 or secured debts are not over $807,750, may file Chapter 13 bankruptcy, also know as individual debt adjustment. Under Chapter 13, the debtor may keep his property and all his debts are forgiven as long as the payments are made to creditors according to debt adjustment plan. The period, within which the adjustment plan is customarily fulfilled, varies from 3 to 5 years.

Whatever chapter is chosen, next thing to be done is filing of a bankruptcy petition and a pack of bankruptcy forms. These forms contain the following information about debtor:

• A list of all creditors and the amount and nature of their claims;
• The source, amount, and frequency of the debtor's income;
• A list of all of the debtor's property; and
• A detailed list of the debtor's monthly living expenses, i.e., food, clothing, shelter, utilities, taxes, transportation, medicine, etc.

Bankruptcy courts charge fees for case processing. The filing fees are $209 for Chapter 7, $194 Chapter 13 and $893 for Chapter 11. There are also miscellaneous fees charged. You should check with the bankruptcy court for the current fee.

Related content about discharging tax in bankruptcy can also be viewed at MyTaxProblem.com