Overextended
You got caught by the credit creep and can't pay your bills. You charged too much or your income changed and you can't pay your bills. You pay so much in interest and late charges that the debt keeps getting larger instead of smaller. You are thinking of declaring bankruptcy.
Consumer Credit Counseling
Filing for bankruptcy is the last thing you want to do. Don't expect your bankruptcy lawyer to tell you that, he doesn't make any money if you find another way out. Your first step should be to contact a non-profit consumer credit counseling agency. They will negotiate with your creditors to reduce your interest rates, stop late payment fees and consolidate your bills. You will send one reduced monthly payment to the agency and they will pay your creditors. Call them and work out a payment plan as soon as you realize you are in trouble. The longer you avoid dealing with the problem, the more your debt climbs as companies raise your interest rates and keep piling on the late fees.
Finding Help
You will find consumer credit counseling services in most cities and many also offer online counseling.The National Foundation For Credit Counseling web site allows you to search by state or zip code to find an agency near you.
When people file chapter 7 bankruptcy they often have al their debts cancelled. With chapter 7 your assets are liquidated and the money is used to pay your creditors. The problem is that many people in this situation have no assets to liquidate and the creditors wind up with nothing. They have to raise prices or interest rates to recover their losses. This hurts everyone. The new law will make it much harder for people to qualify for a chapter 7 bankruptcy.
With a chapter 13 bankruptcy a payment plan up to 5 years is set up to allow you to repay your debts. The new law will use living standards supplied by the IRS to decide what is a reasonable amount to pay for normal living expenses such as food and rent. The court will then decide how much you should be able to pay towards your debt.
Before you can file for bankruptcy under the new law you will be required to go to credit counseling which you will have to pay for yourself. The changes in the law will also cause an increase in attorney fees. Your best bet is not to get into this situation in the first place. If you lose your job, get sick, or can't make your payments for whatever reason, contact your creditors and try to work something out. Do it before things get totally out of hand.
For more detailed information visit the American Bankruptcy Insitute web site.
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