Sabtu, 18 Juni 2011


If you are thinking of declaring personal bankruptcy, take a deep breath and think again! It is a very serious step and you will have to face a lot of consequences later on, which are not that easy to handle! Therefore, before going further with the step to declare yourself legally bankrupt, think if there is any other option that you can consider! Declaring yourself bankrupt in the eyes of the law will not only hamper your image, but your credit rating as well. There are a bunch of legal formalities and procedures that will require a lot of documentation as evidence supporting your bankruptcy. Therefore, think twice before you act. However, if you have no other option, then read on further to know the procedure for the same.

Procedure for Filing Personal Bankruptcy

As mentioned earlier, the procedure demands a lot of documentation and formalities that need to be completed, especially after the change in personal bankruptcy rules in 2005. It is advisable not to rush into the procedure without giving it a serious thought! Check all the possible alternatives that you can for avoiding bankruptcy, and only after analyzing all your options, go further with the process. Another thing that you need to keep in mind is that your income must be higher than the median of your respective state. If not, then you won't be eligible to declare yourself as bankrupt under chapter 7 of personal bankruptcies. In this case, you will have to go for bankruptcy filings under chapter 13, which means that you will be obliged to pay all your debts within a period of 3-5 years. Bankruptcy under chapter 7 and chapter 13 are the only two types of personal bankruptcies that you can file to declare yourself bankrupt. Mentioned below are the steps that you need to follow when it comes to the legal procedure of bankruptcy declaration.
  • Collect your entire personal and financial information, including your tax returns for the past 2 years, your credit report (in order), your loan papers, car titles, real estate deed, and a list of your secured and unsecured debts.
  • Once you have gathered all the information, the next step would be to complete filling the necessary bankruptcy forms, with or without an attorney! The bankruptcy forms that you will fill are known as schedules which will require you to fill the information regarding your recent financial transactions (mostly of the last 2 years).
  • If your income is higher than the median, you will have to file a chapter 7 bankruptcy with your local state bankruptcy court, the fee for which is $200.
  • If your income is less than the median of the state, then you will have to file your petition under chapter 13 bankruptcy, along with a repayment plan which shows how you propose to repay your debt within 3-5 years. The fee for the same is $185.
  • As soon as you file your petition with your local bankruptcy court, a stay on your debt payment comes into effect. This forbids any creditor to ask for repayment or claim anything out of your property.
  • After the stay is active on your debt payment, the next step of the procedure would be commencement of a 341 meeting, which usually occurs after a month from the date of filing your petition. All the debtors are a part of this meeting wherein the prime purpose of the meeting is to resolve conflicts and negotiate. The judge interferes only if a compromise fails to be made between the debtors and the creditor.
  • After a meeting with the debtors, a creditor meeting is held, which is usually a short meeting of five to six minutes to discuss the same issues.
  • Based on the discussion of the two meetings, if the judge finds that there are no problems and challenges by either of the parties, a notice is issued by the court within a time frame of 4-6 months, stating that the bankruptcy is legally discharged.
Consequences of Declaring Personal Bankruptcy

After knowing the procedure of becoming a bankrupt in the eyes of the law, you should also know the consequences that will follow after the bankruptcy has been declared! One thing is obvious that your financial future will go for a toss! It won't be easy for you to start off all over again as credit companies will not be that easy-going when it comes to giving you a loan. Did you know that credit agencies can report your bankruptcy for up to 10 years from the date of filing a petition for bankruptcy? What if an emergency comes up, say a medical emergency, or a need to purchase a home? Whenever you will approach a credit company to get a loan, they will look at three parameters, your recent debt-income ratio, your financial condition, and your credit reports showing the history of payments. By analyzing the fact that you have declared yourself personally bankrupt, your application is most likely to get rejected. Even if you manage to get a loan, it will be granted on very high interest rates!!! Another among the consequences of declaring bankruptcy is that you will have to wait for at least 2 years before borrowing credit if you have filed a discharge under chapter 7, and 1 year if you have filed a discharge under chapter 13. Speaking of chapter 13, if you have made the payments on time, then the credit agencies remove the bankruptcy from your credit report after a period of seven years. Nevertheless, this article on personal loans after bankruptcy might be a useful read in such a case.

After knowing all about the procedure and the consequences that follow after becoming legally bankrupt, I would once again advice you to check all other possible bankruptcy alternatives before you go further with this procedure. However, if declaring bankruptcy is the only option you have, find out all the facts that you can, discuss it with your lawyer, and get ready to face the consequences. Though the consequences are long-term, they won't be permanent.

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