If you’re seriously buried in debt and don’t know what to do, bankruptcy may be the option you’re looking for. You shouldn’t make the final decision until you discuss things thoroughly with a good lawyer and look at all your other options carefully. However, it may give you the relief you’re looking for.
But wait a minute. Isn’t bankruptcy defunct due to the recent changes in the bankruptcy code? Not at all. Congress did make some changes that make the process more involved, but there’s still a great chance that you’ll be eligible to file for bankruptcy if you make the decision.
The new chapter seven bankruptcy laws make the process longer and more painstaking for the individual consumer, but chances are you can still use bankruptcy if you need to. It’s important to understand the difference between the major forms of bankruptcy. The most common form, and the one you probably are thinking about, is chapter seven.
Chapter seven bankruptcy, by the way, is designed to discharge (or eliminate) all of your debt. However, under the changes that were recently made, you have to prove that you’re not able to pay off your debts by taking something called the means test. This test looks at your current income and expenses to see if you really are in over your head.
The test is specifically designed for those with a relatively high income as compared to other workers in your state.
You shouldn’t worry too much about the new regulations, because you will probably be eligible for chapter seven anyway. Even if you’re not, you can still choose chapter 13 bankruptcy which gives you some breathing room by creating a payment plan for 3 to 5 years.
Some of the other changes in the recent bankruptcy law require you to take credit counseling and financial management classes as part of the process. The goal is to make you more financially savvy so you don’t end up in the same situation again.
Keep in mind that there are lots of details and exceptions that you’ll have to work out with your lawyer, so don’t try to go through this process by yourself.
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