Tuesday, April 03, 2007

7 Steps to a Fresh Start After Bankruptcy

When you have more debts than you have assets, bankruptcy is one option to consider in order to give yourself a “fresh start.”

There are actually many types of bankruptcy provided under the law but the most common is Chapter 7, otherwise known as liquidation.

When filing under Chapter 7, all your assets, excluding those that are exempt under the law of your state, are dissolved and liquidated. Usually, the person tasked to do this is the court-appointed official, called a trustee.

The trustee has many responsibilities, including the following:

• Prepare the documents needed for declaration of bankruptcy

• Review the file and check if there are any fraudulent preferences or reviewable transactions made

• Any available assets should be sold by them

• Chair meetings with creditors

• Serve as counsels for the debtors (Hence, you need not hire a bankruptcy lawyer when filing under Chapter 7)

• Recommend whether the person applying for bankruptcy should be discharged or not

All in all, the most important task of the trustee is selling your properties and using the proceeds to pay your creditors. After doing such, the court will then cancel many of your remaining debts, thus affording you a “fresh start” to life.

Here is a step-by-step guide to filing a bankruptcy under Chapter 7:

Step #1: Decide whether you should file for bankruptcy or not.

Filing for bankruptcy is a personal decision, influenced by many factors, such as the amount of serious debts and your ability to meet the original payments or pay the full amount.

For starters, when you are broke, it is never a nice experience getting harassed by creditors for debts incurred. For another, your decision to file should not be made for the sole purpose of putting a stop to your demanding creditors. This is an important point since secured creditors may apply for “relief from stay,” thus allowing them to continue their efforts to repossess or foreclose even though you already filed for bankruptcy.

And finally, there are certain debts that you will not be able to get rid of even after filing for bankruptcy under Chapter 7. These debts that cannot be discharge include the following:

• Taxes and tax liens

• Student loans

• Domestic support obligations (including child support and alimony)

• Luxury goods over $500 purchased within 90 days of filing

• Fines or penalties of government agencies

• Cash advances of more than $750 taken within 70 days of filing

• Fraudulent debts

• Willful or malicious injury to another

• Death or personal injury from the operation of a motor vehicle, aircraft or vessel while intoxicated – i.e., injury due to drunk-driving or driving under the influence

• Condominium or cooperative association fees

• Debts not listed on your schedules (That is why it is important to disclose all dischargeable debts upon filing).

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