Bankruptcy

Bankruptcy is a sensitive issue and many people are hesitant to even talk about it. You may think that bankruptcy is a coward's way out, a last resort, or a step too embarrassing to take. Nothing can be further from the truth. However, bankruptcy is certainly not the choice for everyone and you need to weigh things clearly before you decide to take it. Bankruptcy may not even be the right decision for you, but you owe it to yourself to become educated about all of your options so that you can make an informed decision. Once you know, you've already won half the battle.

Remember: you are not alone.

Bankruptcy is defined as a legally declared inability by an individual (like you) or an organization (such as companies and businesses) to pay their creditors. Bankruptcy is your right, and you have every prerogative to exercise it. Millions of other people have already maximized this entitlement. So if you are thinking about filing for bankruptcy, don't be embarrassed. It is far more common than you think.

Statistics show that 90% of all bankruptcy cases stem from three top reasons: job loss, uninsured medical bills, and divorce. More extreme cases include identity theft and total disability. No matter what your reason, though, you can turn bankruptcy into a good experience and slowly but surely rebuild your financial future-if you know what to do.

Educate yourself.

The U.S. Bankruptcy Code details all the legal aspects you need to know about bankruptcy: the process, your legal rights, and the security due you. In fact, you may be released from your debts, or perhaps be required to only pay a portion of each debt under the protection of the bankruptcy court.

There are two types of bankruptcy for individuals: Chapter 13 bankruptcy and Chapter 7 bankruptcy.

A Chapter 7 bankruptcy is a "liquidation" bankruptcy where your non-exempt assets are sold to help pay the debt. They will exclude your home or your vehicle because these are exempted. If you do not have ability to pay back your debt, then this type of bankruptcy is for you. All the leftover debt after the liquidation is discharged, and you start with a clean slate. The only downside is that you will probably have a difficult time securing loans after this type of bankruptcy. Don't be afraid to read up on bankruptcy so you can understand the statutes and judicial proceedings involving in seeking court support in getting a fresh start.

Harassed by creditors? Get good protection.

Just because you are bankrupt does not mean you cannot afford a lawyer. Many law firms now specialize in bankruptcy cases, and offer very flexible payment terms. Find a good lawyer who can immediately free you from nuisance creditors by securing an "Automatic Stay" order from the court. This order will disallow your creditors to collect their debts from you.

Choose a lawyer with a good reputation for working bankruptcy laws to your favor. Such a lawyer can save your car from repossession or your home from foreclosure. You can also look into ways to prevent foreclosue such as loan modification and short sale. Good lawyers also continue to assist you even after your bankruptcy case has been closed. It's a good idea to hire lawyers affiliated with "debt relief agencies", because they usually extend post-bankruptcy support.. They have special programs that teach you how to control you're spending, live within a budget, start a savings plan, and ultimately rebuild your credit. It is even better if you find an attorney who is a Certified Bankruptcy Specialist. This means that the attorney has more training and experience specifically in the area of Bankruptcy.

Life after bankruptcy

Bankruptcy is not the end of your life. In fact, it will enable you to start on a clean slate, and live your life without the burden of unpaid credit. While bankruptcy will likely stay on your credit report for about six to 10 years, you can immediately demonstrate to banks and other lenders that you have acquired the discipline to maintain a good credit report. Expect to receive new credit card solicitations within days after your discharge. You will need new credit cards, but remember not to fall in the same traps again. Be extra responsible in spending and borrowing money, and always make your payments on time.

You will also be able to finance a car immediately after your bankruptcy discharge. Many automobile dealerships are prepared to give you good deals even after you've gone bankrupt.

Financing a home is also possible within about two years after bankruptcy, provided that you can make a minimum down payment and prove your ability to make the monthly mortgage payments.