According to recent bankruptcy facts and statistics, people filing bankruptcy forms for Chapter 7 increased 43% from December 2007 to December 2008. Business bankruptcies increased 54% during that same time period. So far, the month of May 2009 has seen a 40% increase in business bankruptcy filings, including corporate giant General Motors. While it may just seem “normal” to file when over one million other Americans are filing, you should be aware of the inner workings of its proceedings before you jump in headfirst.
First, let’s take a look at the most basic bankruptcy facts and what filing bankruptcy forms can and can’t do for you. Consumer law allows you the ability to legally eliminate most — if not all — of your debts through a bankruptcy discharge. This includes all credit cards, medical/hospital bills and some personal loans. If your car has been repossessed or your home in is foreclosure proceedings, court bankruptcy forms will put a stop to these actions.
You’ll be able to stop wage garnishment, utility shut-offs and debt collector harassment as well. However, it can’t completely absolve a car loan, a student loan or a mortgage payment. It cannot discharge alimony payments, child support payments, criminal fines, IRS tax debt or court restitution orders. Filing for it cannot save you from debts you incur after the initial filing and cannot protect your spouse or cosigner.
Don’t be in the dark when it comes to bankruptcy facts. Even though you feel you have no money at all, you will need to summon up some cash for the legal forms, filing and legal professional fees. With Chapter 7, it’s possible to fill out the paperwork yourself if you understand the law well enough, but you will still need to pay nearly $300 to the court in administrative fees.
Hiring the power of attorney to see you through could cost from $400 to $1,500. If you’re filing for Chapter 13, you won’t be getting off completely free, as you will need to sign up to a monthly payment plan to satisfy your debts. Most people who are in debt would preferably try debt consolidation or debt settlement as an alternative to declaring broke, but only bankruptcy can help people whose homes are in foreclosure, cars have been repossessed, wages have been garnished or who have been sued by creditors.
Now that you know the basic bankruptcy facts, you can decide if this option is for you. For many Americans, a clean slate is necessary to escape the burden of medical bills, poor credit decisions or impending foreclosure. Before you jump headfirst into something that will remain on your credit history for 10 years, you should meet with a nonprofit credit counselor or legal professional to discuss new forms for debt management, debt consolidation, debt settlement or a renegotiation of loan terms before you declare being broke, which should be viewed as a last resort.