While debtors would like to file bankruptcy online this option is not yet available. However, debtors can use the Internet to conduct other aspects of the bankruptcy process such as finding a lawyer, accessing specific forms and documents, and conducting research.
The reason debtors cannot file bankruptcy online stems from many sources. One of the most prevalent is petitions must be recorded through the court. Another is debtors are required to attend a 341 creditor meeting in person to devise a payment plan. Then, there are the new bankruptcy laws which require debtors to adhere to specific guidelines.
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The Bankruptcy Abuse Prevention and Consumer Protection Act took effect in 2005 as a deterrent to consumers seeking financial relief caused by reckless spending. Prior to BAPCPA, petitioners would often file for protection under Chapter 7 which allows debts to be written-off. Today, the majority of debtors are required to seek debt help under Chapter 13.
Chapter 13 bankruptcy allows debtors to keep valuable assets. This chapter is often used by homeowners facing foreclosure as filing personal bankruptcy allows them to stop foreclosure while reorganizing their debts.
In order to determine how much debt must be repaid, petitioners are subjected to the 'means' test which compares their income vs. state income levels. Debtors whose income levels are higher than state median levels are typically required to file Chapter 13 and submit a payment plan. Those earning less than median levels may qualify for Chapter 7.
Filing bankruptcy requires help from a qualified bankruptcy lawyer. BAPCPA altered rules for lawyers and now requires them to submit a certified statement which verifies a legitimate need for court protection to restructure outstanding debts.
BAPCPA also requires debtors to undergo credit counseling through an agency approved by the U.S. Trustee. Petitioners must submit a completion of counseling certificate to the court in order to have their petition approved.
Once a Chapter 13 payment plan is in place, debtors submit installments to the bankruptcy Trustee until debts are fully paid. Chapter 13 plans normally extend for 2 to 5 years and can place serious financial stress on petitioners.
Chapter 13 payments are in addition to normal monthly expenses. Those who are struggling financially often find it challenging to adhere to payment plans. It is estimated that nearly 80-percent of petitioners fail out of bankruptcy within the first year because they cannot comply with the restrictive payment schedule.
There are two ways petitioners can fail out of bankruptcy. If payments are not made, creditors can submit a request to the court seeking dismissal. Or, the bankruptcy Trustee can inform the court of lack of compliance. Either way can have devastating results because petitioners lose protection from the court and are held responsible for outstanding debts.
Personal bankruptcy can remain on credit reports for up to 10 years and prohibit debtors from obtaining credit for several years. It usually takes 2 to 3 years before debtors can obtain financing or credit cards. Additionally, debtors are prohibited from incurring new debt while their bankruptcy plan is in effect.
Careful consideration should be given prior to submitting a bankruptcy petition. Debtors should engage in online research to determine if bankruptcy alternatives exist that can provide the same results without the harsh consequences. Alternative solutions might include credit counseling, budgeting, debt consolidation, or debt settlement.
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