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Broke? Bankrupt?

With the availability of credit and low-cost loans — now followed by recession and skyrocketing cost of living expenses — consumers in increasing numbers are getting in over their heads financially.

Corporate downsizing and cost cutting often results in workers settliing for lower salaries or filing for unemployment insurance. Higher out of pocket costs, or unexpected job loss can turn a balanced household budget into a disaster plan.

In short, bankruptcy is not normally a situation anyone can plan for.

It happens gradually as the interest on borrowed money builds, and payments get harder and harder to make. Bill collectors begin to call. At first they are willing to work with you to help you catch up, but after a while the calls become less friendly and more threatening.

How to file for bankruptcy

No matter how carefully you budget and how good you intentions are, if expenses are larger than what you make, you won't be able to pay everyone. It may be time for you to consider contacting a bankruptcy lawyer to find out if you can clear up your debts and make a new start.

Following the passage of new US bankruptcy laws in 2005, bankruptcy has become more difficult though still possible for many American families — this despite the extra paperwork, higher fees, and mandatory credit counseling before you file.

A bankruptcy lawyer can work with you to work out settlements or set up payments plans that are realistic and may save you from actually having to file for bankruptcy. Your lawyer can explain the different types of bankruptcy and discuss options with you that you may not know about.

Personal Bankruptcy - Chapter 7, Chapter 13

Chapter 7 - Debtors file Chapter 7 bankruptcy under rules that may qualify them under the "Means Test", an equation that figures your income according to the state median. If qualified, they must turn over all non-exempt property to a court appointed trustee. Proceeds from the sale are used to pay off all unsecured debts and, under law, your wages can no longer be garnished and creditors are ordered to stop collection proceedings.

Chapter 13 - An alternative to Chapter 7, this program allows debtors to set up an installment plan to repay their debts in full, or in part, over time - usually anywhere from three to five years. All disposable income must be turned over to a court appointed trustee who pays off your creditors during the period specified.

Bankruptcy pros and cons

Filing for bankruptcy is not something that should be done lightly. Consider that recovering your good credit rating may take many months or sometmes years, resulting in problems when you try to buy a car or home, or even rent an apartment or apply for a job.

If you can avoid filing for bankruptcy and get your credit score back up without the help of the courts you will be better off. The problem is that if you can't pay the bills, you credit will be ruined anyway. Claiming bankruptcy may be the only way for some consumers to wipe out credit debts that will only get higher with penalties and interest.

More about filing for bankruptcy around the Web:

If you're one of growing number of consumers struggling to pay off debt, stop avoiding the harassing calls from creditors and get expert advice how to file for bankruptcy, settle your debts, and otherwise get your personal finances back in order...

Bankruptcy LawTrove - The motherlode, with links to top spots on the Internet for more on bankruptcy statutes, regulations, law and government resources, products and services, an online bookstore, extensive FAQ, and related resources.

United States Bankruptcy Courts - Official info on basic bankruptcy filings with related statistics, facts on bankruptcy claim abuse, FAQ, and complete do-it-yourself set of Bankruptcy Forms in downloadable PDF format.

Debt & Bankruptcy - Legal Information - Nolo - Detailed explanations on how to avoid overspending, the pitfalls of loans and credit cards with more on student loans, debt collection, Chapter 7 and Chapter 13 bankruptcy and credit repair.

ABI American Bankruptcy Institute - A premier site for the latest news and feature stories on the subject including the latest legislation, statistics, FAQ, information on how to file, bankruptcy lawyer search, related publications and membership info.

LII: Law about...Bankruptcy - A clear concise overview together with pages of links to legislation information, federal and state statutes, and choice resources for more information.

Bankruptcy Law - Lawyers, Attorneys & Free Legal Information - Consumer guide from freeadvice.com with do it yourself info on Chapter 7, 11, 12 and 13 bankruptcy fillings, facts on debt discharge, retirement fund protection, and related info.

Personal Bankruptcy Chapter 7 & 13 File Bankruptcy Courts - A short history beginning in the Middle Ages when indebted tradesmen had their benches broken ("banca rotta" - bankruptcy) and were thrown in prison - with more on modern bankruptcy's much milder effects, a listing of bankruptcy courts in all 50 U.S. states, and a glossary of related terms.

InterNet Bankruptcy Library - A top destination for corporate bankruptcy law featuring news archives, local bankruptcy regulations, suggested reading, related links.

Free Legal Services - Links to free or low-fee legal services & advice offered by legal aid societies, law societies or associations in all 50 U.S. states.

The information provided on these pages is intended as reference
only and does not constitute professional legal advice.

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