Bankruptcy 101
What Is Bankruptcy, and When Is It Time?
The word bankruptcy brings to mind all kinds of negative feelings and understandings. You may have an idea of what it means, but not understand the reality of it. In this section we’ll explore what it actually means to declare bankruptcy, the types of bankruptcy, how to know if it’s time to declare it, and what to do after you’ve gone through the process.
Bankruptcy Basics
Without getting too specific, bankruptcy is a legal declaration that says you aren’t solvent and your assets will be distributed among your creditors. However, bankruptcy is a lot more complicated than that basic definition.
Bankruptcy is controlled by Federal law in the United States. However, State law does affect the way it’s carried out locally. For example, the determination of whether or not you’re eligible to declare is found at the State level.
If you’re completely overwhelmed by the amount of debt you have, bankruptcy can help to wipe the slate clean for you to start over. However, it’ll stay on your credit report for as many as 10 years and will affect your ability to receive credit until that time. You need to take this decision very seriously.
I can't stress this point enough. Do NOT attempt to file bankruptcy on your own. The new laws enacted in 2005 have made it increasingly difficult to do it on your own. This is not a process you want to mess with. Get an attorney.When you decide that bankruptcy might be right for you, the best thing you can do is hire an attorney to assist you with the process. While you can represent yourself in bankruptcy court, it helps to have someone in your corner who knows the ropes.
Assistance from an attorney does have a price. You can spend anywhere from $500-$3000 to get legal representation, but that amount is probably much smaller than the amount of debt you actually deal with on a monthly basis.
Most bankruptcy attorneys will give you a free consultation so that you can go over your situation. He or she will then recommend which type of bankruptcy for which you’re eligible and go over the process of filing paperwork and going to court.