Bankruptcy was long considered the primary option for those unable to cope with an impossible debt load. In 2005, however, the Bankruptcy Abuse Prevention and Consumer Protection Act was passed as a way to limit "abusive" consumer bankruptcy filings.
This sweeping change in the federal bankruptcy law made it more difficult than ever to file for bankruptcy.
One of the law's provisions forces a more stringent test to qualify for Chapter 7. A Chapter 7 filing is a "liquidation-of-debt" bankruptcy.
The more recent Chapter 7 law lowers income thresholds. It actually assigns higher values than before to the personal assets you own. These are the significant points to consider:
Does your income exceed the state median income?
Can you pay as little as $100 a month after housing, car payments, past-due taxes and child support?
If your answer to these questions is "yes," then you may not qualify for filing under Chapter 7.
If you cannot qualify to file under Chapter 7, you may be able to file for bankruptcy under Chapter 13. Remember: Chapter 13 filing requires that you eventually repay all secured debts and as much unsecured debt as possible. The "means test" and other provisions of the law require more paperwork and attorney involvement. This adds up to greater cost for you and makes for additional legal proceedings that you have to concern yourself with.
Under Chapter 13, you now have to show that you've already been through legal counseling. Furthermore, there are now stricter limits on the number of bankruptcy filings a person can make in any given period.
One of the most significant factors of bankruptcy is that it will leave a bigger mark on your credit record than any other form of debt relief. For up to 10 years, in fact.
Despite these considerations, however, bankruptcy still may be the best final option for you. After all, it IS a legal structure designed to provide much-needed debt relief. And proper legal counseling can provide proper assistance to lead you through all the technical hoops. ReallyGreatRate can help you find the best legal counsel for your specific circumstance.
David Leuthold, vice-president of the Association of Settlement Companies (TASC) – one of the leading trade organizations representing reputable debt relief organizations – points out that many of those in dire financial circumstances can be better served by the other debt settlement options TASC member companies provide. TASC member ReallyGreatRate works with TASC companies as well as other consumer-oriented organizations to provide the most complete set of options for individuals who need debt relief now.
Whether you are considering bankruptcy or any other debt relief option, first make sure you are aware of what, exactly, your options are. Contact ReallyGreatRate for a free consultation.