Perhaps you have lost your job or have mounting medical bills, but you just can't keep ahead of your creditors. You wonder whether filing for bankruptcy can be a viable solution and allow you to get your life back on track. You are not alone. Analysts predict that bankruptcy filings will hit 1.5 million in 2009, an increase from 1.1 million in 2008. This is below the 2005 total of two million filings, due to the fact that the 2005 U.S. Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) significantly toughened the U.S. Bankruptcy Code when it became law.
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But you may have heard that to enter bankruptcy protection would cost you a significant amount of money in lawyers' and court fees. Is this true? Is it possible to file for bankruptcy for free?
If you are considering bankruptcy, the first thing you need to do is learn about the different types of bankruptcy that are available for private citizens. For a basic introduction, log onto uscourts.gov/bankruptcycourts/. This U.S. government website provides objective information free of charge about personal bankruptcy.
Chapter 7 (Liquidation)
For individuals who have very few assets (these cases are often called "no-asset cases"). A court-supervised trustee assumes control over the debtor's assets, liquidates them to cash, and makes distributions to creditors. The debtor is released from many or all of their debt obligations, but typically does not get to keep many assets aside from a short list that may include a primary residence and one vehicle.
Chapter 13 (Adjustment of Debts)
For individuals who have debts but who also have a source of income and are able to make regular payments to their creditors. Under Chapter 13, as long as the debtor sticks to a three- to five-year payment plan, the debtor is often able to keep assets such as a primary residence, even when facing foreclosure.
There are other forms of bankruptcy, primarily for businesses, as well as Chapter 12 (Adjustment of Debts of a Family Farmer or Fisherman with Regular Annual Income), which is designed for family farmers and fishermen with regular income. The Servicemembers' Civil Relief Act provides certain protections for members of the military.
Can I File For Bankruptcy For Free?
If you are considering filing for bankruptcy protection, you should consult a bankruptcy lawyer. Depending upon the state in which you file, legal fees will average $1,700. But if you are truly determined to do it yourself, you need to educate yourself about the requirements for Chapter 7 or Chapter 13 bankruptcy, including how to qualify, how to file, and what may happen to you and your assets if the court grants you a discharge.
For bankruptcy information, log onto the U.S. Federal Trade Commission website at ftc.gov. In the search box at the upper right type "bankruptcy". You will be directed to many informative articles and resources. Topics covered include a review of alternatives to bankruptcy, an analysis of your personal financial situation, and the creation of a personal budget plan.
You will also find information on the U.S. Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), which brought many changes to personal bankruptcy and made the process more complex and with more requirements. For example, BAPCPA mandates that individuals who seek bankruptcy protection must first get credit counseling from a government-approved organization. They need to do this within 180 days before they file. They are also required to complete a debtor education course.
The actual bankruptcy court fees that you are required to pay are not high; according to uscourts.gov, the total fees collected at time of filing Chapter 7 are $299, and for Chapter 13 the total fees are $274. If you hire a bankruptcy attorney you are required to pay the attorney's fee in advance because attorney's fees are not recognized by the bankruptcy court and cannot be a part of a bankruptcy discharge.
Largely because of BAPCPA, it is very challenging for an individual to file for bankruptcy without the professional guidance of a bankruptcy attorney.
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