Bankruptcy Filing for Individuals

Bankruptcy is considered to be the final resort solution to unmanageable debt. Let's take a look at some of the issues involved in a bankruptcy filing. 
 
The Bankruptcy Act of 1898 provided debt protection to businesses, but not to individuals. The Bankruptcy Reform Act of 1978 finally gave individuals a method of debt protection in the form of Chapter 7 and Chapter 13 bankruptcies. 
 
A Chapter 13 bankruptcy involves setting up a court approved 3-5 year debt payment plan. Chapter 13 is for those people who have too much income to qualify for a Chapter 7 or when you want to repay your debts while protecting your real estate or other property. With a Chapter 13 bankruptcy you will wind up paying anywhere from 50% to 100% of your debts. Be very careful because if you miss a payment you can be forced to pay back the entire debt.  

The Bankruptcy Abuse Prevention & Consumer Protection Act of 2005 requires that an individual receive credit counseling from an approved agency at least 6 months before filing for bankruptcy protection. You must also pass a Means test, which determines your legibility for either Chapter 13 or Chapter 7 bankruptcy. In addition to these requirements you must also complete an approved debt management class before receiving your bankruptcy discharge. 
 
Once you have filed for bankruptcy you will start to receive credit card offers in the mail. Credit card companies know that you have filed for bankruptcy and may assume that you will mismanage your credit cards and build up further debts. They also know that you will not be able to apply for bankruptcy protection for another ten years so your debt to them cannot be discharged. 
 
Take control of your finances and use bankruptcy for what it was intended - a fresh start. Be careful not to fall back into the debt trap.