If you have decided of filing for bankruptcy because of overwhelming debts and there are no ways to come out of this mess, make sure that you are fully aware of its short term and long term consequences. You need to ascertain which type of bankruptcy is right for you. Chapter 7 bankruptcy will stay on your credit report for ten years. Qualifying for any new credit after filing for bankruptcy will be quite tough in the initial years. You never know if any kind of emergency shapes up in the future and you might need a lot of money. Be well prepared before you choose this option. Here are a few things to know before filing for bankruptcy.

Common bankruptcy types: In total, there are four types of bankruptcy. The most common is the chapter 7 bankruptcy which is liquidation or straight bankruptcy. In this process, all your assets and properties will be liquidated to pay off the existing debts. Another type of bankruptcy is chapter 13 bankruptcy in which a repayment plan is set for a certain period of time, usually within 3 to 5 years without liquidation of your assets and properties. Before filing for either type, you have to qualify in the means test. In most cases, people have to file for chapter 13 bankruptcy because they do not qualify in the means test and makes it difficult to file for chapter 7.

Hiring a lawyer: Many people wish to file for bankruptcy without hiring any attorney for assistance. While this is possible, it is always suggested to take the help of a professional bankruptcy attorney so that the legal complexities can be taken care of immediately and the filing process gets easier. If you cannot afford to pay the attorney fees, look for some free legal services in your area. You may contact your local bar association for information regarding their “pro bono”. You may also visit the nearest law school or legal clinics in your area.

Filing without an attorney: Partnerships and corporations require a lawyer to file for a bankruptcy case. Individuals can represent themselves without an attorney. Because of the varied state laws and the complicated system, sometimes the filing process without an attorney can often get too difficult. If you are not fully informed about the process, your individual rights may get compromised with one misstep. Besides, you may lose the legal protection and the benefits if proper documents are not filed correctly.

Credit counseling: Before filing for bankruptcy, you will have to undergo credit counseling with a government approved credit counseling provider within 180 days before the bankruptcy case is to be filed. Not filing the required documents will cancel the bankruptcy case.

This entry was posted on Monday, August 24th, 2009 at 4:23 pm and is filed under Bankruptcy. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.