Receiving accurate bankruptcy information is essential to determine whether the filing of personal or business bankruptcy is the best solution. Major changes in U.S. Bankruptcy Code occurred with the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act. To comply with the new regulations petitioners should retain the services of a qualified lawyer.

One important piece of bankruptcy information is petitioners are required to repay partial debt by developing a Chapter 13 payment plan. The amount owed is determined by the \’means\’ test which uses mathematical calculations to compare debtors\’ income to their states\’ median income level.

In cases where debtors earn less than state income levels, they may be allowed to file their petition under Chapter 7. In the past, many debtors sought debt relief under Chapter 7 by liquidating assets. Remaining balances are discharged giving debtors the ability to create a new financial start.

With Chapter 13 bankruptcy, debtors must pay part of their debts over a period of time. In general, Chapter 13 payments extend for three to five years and can cause extreme financial hardship, especially in cases of unemployment or unforeseen emergencies.

Throughout the payment plan borrowers must contribute a large amount of available income to the court Trustee. If borrowers miss payments, creditors may rely on the court and request termination of the petition.

In some situations, the Trustee can negotiate with creditors if extenuating circumstances occurred, causing the debtor to the fail of bankruptcy. If it\’s a temporary problem, creditors usually give debtors a second chance. Debtors who become repeat offenders do not receive much sympathy.

Under BAPCPA regulations, debtors are required to enter into credit counseling using services of a U.S. Trustee approved agency. BAPCPA allows debtors to obtain counseling 180 days prior to submitting a petition. Debtors are responsible for associated costs; however, most agencies offer low- or no-cost services to those whose incomes fall below certain levels.

Petitioners lose court protection against creditors should the court dismiss the petition. Creditors may proceed with collection action, including foreclosure, wage garnishment, or by obtaining court-ordered judgments. Judgments remain on credit reports until satisfied and can cause harm to FICO scores.

It is important to note that when homeowners file Chapter 13 to save their home from foreclosure and later fail out of bankruptcy, foreclosure proceedings begin where they left off. In some cases, banks initiate proceedings in as little as three days.

Under Chapter 13 repayment debtors must do whatever it takes to stay on track. Otherwise they will lose the protection of rights, and will likely lose their home. For this reason alone, bankruptcy alternatives should be explored before making a final decision.

Alternatives can include debt settlement, debt consolidation, budgeting and credit counseling. It is important to explore all available options and understand the advantages and disadvantages of each.

The most accurate source for obtaining bankruptcy information is the U.S. Department of Justice website at Justice.gov. Debtors can review BAPCPA regulations for both personal and business bankruptcy and locate approved credit counseling agencies.

Author Bio: Simon Volkov is a California real estate investor who specializes in distressed properties. He provides extensive bankruptcy information and shares insights on the pros and cons of using this strategy to avoid foreclosure and obtain debt relief. Before making a decision visit www.SimonVolkov.com.

Category: Finances
Keywords: bankruptcy information, chapter 13 payments, chapter 7, bankruptcy alternatives, credit counseling