Bankruptcy Services - Understanding your options

By: Aaron H. Prather

Bankruptcy services aim to stop the sinking ship and help you avoid being forced to file bankruptcy by providing the opportunity to move your collections through a logical and effective progression of payment requests. Bankruptcy services are not generally covered by legal aid, nor are the cost covered by any government agency.

Bankruptcy is a legal process which can relieve you of most, if not all, of your debts. For the majority of people bankruptcy is something they think won’t affect them, but in this day of ever increasing consumer spending, easy availability of credit cards, and increases in interest rates, the concept of personal bankruptcy is beginning to loom large on the horizon. Bankruptcy law is very complicated in nature, and you should always consult with an attorney before you take any action. Bankruptcy laws differ from state to state, with mounds of legal paperwork to complete, so be sure that the lawyer you select is an expert in this field.

Individuals will normally choose between filing a Chapter 7 and a Chapter 13 bankruptcy. Chapter 7 is the type of bankruptcy used when you do not have the ability to pay off your existing debts. Under the new law, bankruptcy applicants who wish to file under Chapter 7 must meet certain eligibility requirements under a "means test". Under this test, if your current monthly income is less than the median income in your state, you can file for bankruptcy under Chapter 7. Under the new bankruptcy laws, individuals wishing to file bankruptcy under Chapter 7 or Chapter 13 must show their proof of income by providing federal tax returns from the last tax year. If a bankruptcy applicant is ineligible for filing under Chapter 7, he or she must file under Chapter 13 instead. There are differences between Chapter 7 and Chapter 13 bankruptcy, but the main distinction is that under Chapter 13, the debtor enters into a five year repayment plan in which he or she must pay a certain amount of money to creditors, based on an expense to income formula.

A bankruptcy judgment is recorded in your credit history and remains there for seven to ten years, depending on the type of bankruptcy you obtain. People in bankruptcy can still obtain credit as a number of banks now offer "secured" credit cards, where a debtor puts up a certain amount of money in an account at the bank to guarantee payment. Usually the credit limit is equal to the security deposit given, and is increased as the debtor proves his or her ability to pay the debt.

Online bankruptcy services are also available to help you guide through the intricacies of the process. These services help you determine what form of bankruptcy you should pursue and are usually provided on a low flat fee basis. The number of these services is increasing to satisfy the rising demand, so if you are even considering bankruptcy as a way to free yourself of overburdening debt, then it’s probably a good idea to what types of services are available and what they can offer you. Using bankruptcy services, with the help of knowledgeable and experienced debt relief counselors, makes things a lot more manageable for the distressed person.

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