Some may wonder, why can’t people just pay their bills? Often those who are more fortunate are quick to pass judgement against those who have filed or are in danger of filing bankruptcy. There’s certainly a disconnect in the perception of economic status across all classes. No one ever plans for this, there are just too many special circumstances around each person who files bankruptcy that leads them this way.

Major Causes of Bankruptcy

Unemployment - All throughout 2008 businesses began slowing down and plans for expanding were halted, particularly for the bigger companies. Local business in every town across the country were hit first, overall causing massive layoffs.

Foreclosures and Balloon Mortgages - In previous posts we discussed how these types of loans were a major cause of bankruptcy for many since the housing market begain its collapse. Many who managed to hang on and continue paying their mortages for the last year are starting to follow the path that millions of others have taken to relieve themselves of the burden of these subprime mortgage loans.

Medical Expenses - This particularly applies to those who are unemployed, if savings is able to get families by on living expenses and minor costs, medical expenses would certainly put a significant burden on the financial stability of the unemployed.

Divorce - The rate of divorce has always been high in the U.S. the current enconomy is perhaps a major cause of divorce rates in 2008 going into 2009. Because divorces often involve common property and debt, filers often find themselves in need of filing bankruptcy to rid themselves of bad debt and start all over.

Other less obvious causes of bankruptcy may include, having your identity stolen and not being able to resolve the crime, it’s rare but it does happen. Risky investments, such as over hyped stocks and foreign trust funds etc.

How can bankruptcy help me in this Economy?

Regardless of the state of the economy, if your debts are keeping you up and you’re simply not able to sustain a comfortable living, you may very well need to consider this option. Only a qualified attorney can determine for you whether you qualify to file and discharge your debts.

The current economy gives everyone the impression that worse days are ahead, it’s only natural to assume the worst, but carrying your debts along into worse economic times will only prove disastrous for you. When you’re no longer able to pay your bills, if you have not filed for bankruptcy protection your creditors are legally allowed to come after you. Once collections agencies begin harrasing you, you’ll know that it’s time seek protection under bankruptcy.

Whatever the causes of your financial burdens are, bankruptcy protection is a right extended to all US citizens by the federal goverment and it is a bailout that has helped millions of people get a second chance in their finances.

Personal bankruptcy is a way for a citizen to legally find relief from debt, these are the rights that have been extended to all Americans by the Federal government. However within these laws also exist specific qualifications rules, which can not guarantee that all who are ridden with debt will be able to benefit from these bankruptcy laws. Causing some to get creative or seek advice from the wrong sources about how to get around the system and appear to be going bankrupt.

This of course has serious consequences, since almost always, the fraud will be detected and stopped before the case is dismissed.

Those who are legitimately going bankrupt have some options when dealing with their debts and debt collectors. Despite the benefits the filers gain from filing bankruptcy, they often remain wary of the effects that personal bankruptcy leaves on their records, which lasts from 7 to 10 years. During this time potential filers may not realize that bankruptcy is in fact a good option, so they may follow the wrong advice and opt for debt consolidation instead in order to avoid bankruptcy, this is not necessarily a good option in most cases.

Debt consolidation can make sense in some cases, if the debt is mostly unsecured, meaning mostly credit card debt, this typically makes you a good candidate for debt consolidation if you’re still able to make your payments on time. However debt consolidation is not a comparable option to filing bankruptcy. The benefits of filing bankruptcy far outweigh those of debt consolidation for a few reasons.

When you being to accumulate debt, not only unsecured debt, but secured loans, mortgage debt, personal debts etc. Your ability to pay all these debts suffers severely when you lose your job or your main source of income disappears. Even in situations like this you may be hear the advice of debt consolidation specialists that grouping all your bills into one is a good idea. It is not.

Going bankrupt means losing the ability to pay your creditors at all, not necessarily struggling to pay them each month. Both are good reasons to file bankruptcy, however neither is a good reason to simply opt for debt consolidation and the reason why is that under bankruptcy you have certain legal rights that no debt consolidation agency can extend to you. Such as the power of the automatic stay, which provides a shield of protection from creditors, meaning no one can harass you and try to collect from you while you’re in the process of discharging your debts.

Depending on which chapter you file, you may either fully discharge your debts or establish a repayment plan that allows you to repay your debts in a period of 3 to 5 years. In some cases your overall balances may be decreased or interest eliminated.

It’s not easy to accept that you’re going bankrupt but it needs to be clear to you that you have legal rights that can protect you from creditor harassment and if you can not make your payments anymore, then bankruptcy is something you need to consider. Start by contacting a lawyer in your area. Also remember that bankruptcy consultations should be free, so find a legal office that does not charge for this.

Medical bankruptcy is due to rise as the economy continues to worsen and more people find themselves without work. Bankruptcy provides an exit for people who accumulate medical debt the same way it does for those who accumulate consumer debt and are unable to pay for it.

The changes implemented in the bankruptcy code in Oct of 2005 were supposed to discourage consumers from filing chapter 7 bankruptcy and for a while it was so. It was also supposed to discourage and eliminate bankruptcy fraud. So most consumer bankruptcy files ended up as chapter 13 cases which was clearly the intention of the law changes. However, the trend did not last long. Once the real estate market began to peak in 2006, more cases were starting to be filed again under chapter 7 bankruptcy. Three years after those changes occurred the economy has taken a serious downfall causing many businesses to downsize.

Although employees who are laid off are able to take advantage of COBRA benefits, which allows someone to continue paying their insurance premiums and stay with the same health insurance carrier for up to three months. At the end of three months if the unemployed person has not found work they’re simply dropped form the plan and can not continue their coverage unless they’re able to pay for the full premium themselves, which without steady income is highly unlikely.

Unlike consumer bankruptcy, which is often made up of credit card debt and not always out of need, medical bankruptcy comes out of necessity and it may also be paid for with credit cards if medicines and office copays are required.

The U.S. healthcare system provides for a lot of bureaucracy and inflated prices that are impossible to afford for the unemployed. Although the government extends benefits to the uninsured, it typically takes a while for someone to qualify for these benefits and when medical care is needed it needs to be paid for somehow or it can not be rendered.

More people will file bankruptcy due to medical bills in the next few years as the unemployment rate continues to sore. If the medical expenses were paid for using credit cards they can be completely discharged under chapter 7 bankruptcy and if the filer is still unemployed when filing their medical debt for discharge, it is unlikely that they will be met with any obstacles or be forced to restructure the debt under chapter 13 instead.

Divorce is a growing reason for the increased bankruptcy filings as a whole, but because women typically win custody of their children in divorce proceedings, they normally don’t have the necessary income to support them properly and although they’re entitled to child support payments, this is not sufficient income to support kids, pay rent or mortgage and live a normal and comfortable life, so a lot of credit card debt is incurred in the process eventually leading to bankruptcy.

Women and bankruptcy has become more common today and if you’re a mother looking at a possible divorce, you need to make preparations for yourself. Take a close look at your over all debts, and make sure you have your own representation in court.

In order to avoid bankruptcy women should consult a financial advisor who will recommend strict steps you’ll need to implement to start setting money aside if you’re employed. If you’re not employed then it will behoove you to spend some effort to get a job before your divorce proceedings begin.

If you’re in danger of becoming a widow, you must have a clear understanding of the finances in your family if you’re currently not the person in charge of this. Your husband may know a lot about running the budget in your family but if you’re not currently involved in this, you’ll need to learn everything you can before the unthinkable does happen.

Bankrupt women are not a rare thing anymore, more and more women are joining the ranks of Americans who have had to take this route. So if you are concerned about your financial future should you end up alone for whatever reason, you need to consider the option of filing bankruptcy at some point in your life if you’re not employed and have a significant amount of debt.

Bankruptcy Legal Fees

Legal fees may be the bulk of bankruptcy costs, these fees can range anywhere from $400 to $1700 depending on where you are in the country. The cost of filing personal bankruptcy has in fact gone up in the last couple of years, mostly due to the changes in bankruptcy laws, that made it more difficult for individuals to qualify for a bankruptcy discharge while also requiring more paperwork to be filed by bankruptcy attorneys. Many attorneys and law firms understand that their clients are dealing with a lot of debt and may not be able to handle the legal fees all at once. So they have made it easier for filers to take advantage of payment plans.

Bankruptcy Filing Fees

When filing for bankruptcy it would be wise to hire an experienced bankruptcy attorney, as they would be best to calculate your total bankruptcy costs as they apply to the court’s fees. As of January 2007 the bankruptcy court filing fees are $299 for chapter 7 bankruptcy and $274 for chapter 13. There are other costs such as:

1. Registration of Judgment - $39
2. Notice of removal - $250

Conversion Fees

1. Chapter 11 to Chapter 7 - $15
2. Chapter 12 to Chapter 7 - $60
3. Chapter 13 to Chapter 7 - $25
4. Chapter 7 to Chapter 11 - $755
5. Chapter 12 to Chapter 11 - $800
6. Chapter 12 to Chapter 13 - $35
7. Chapter 13 to Chapter 11 - $765

Amendment Fees

1. Schedules D, E and F - $26
2. Amendment to list of creditors - $26

Counseling fees
The basic costs of filing for bankruptcy end with the counseling fees. These are the fees you must pay to receive the mandatory counseling that the new bankruptcy laws require all filers to take prior to getting a discharge. The costs of bankruptcy counseling are rather moderate. Visit the U.S. trustee’s site for a list of approved credit counseling agencies, this portal lists the agencies by state and typically the costs are anywhere between $20 to $40 dollars. The first part of the counseling should be done prior to submitting your bankruptcy petition and the second part prior to getting a discharge.

So the overall bankruptcy costs can certainly add up and make the process more complicated for you if you don’t have the disposable income to pay for it all at once. Your bankruptcy attorney’s fees may be negotiable, or at the very least they may allow you to make installments on their total fees. However the bankruptcy court’s fees will not be negotiable these must be paid in full at the time of filing.

By the end of the first decade of the new millennium bankruptcy cases will have reached tens of millions in the US alone. More people will have filed bankruptcy than have acquired a college degree, retired, or have died of cancer. Current bankruptcy statistics show that businesses, banks and insurance companies are going bankrupt as well as individuals.

Banks and mortgage companies are going bankrupt because of the mortgage crisis that’s been sweeping the country for the last couple of years, while other companies and business are suffering the economic change due to lack of consumer confidence, where people are mostly willing to hold on to what they have rather than continue spending on non-essential items.

Other reasons that contribute to the high number of bankruptcy filings, including loss of employment for a great number of individuals, medical bills, credit card debt, becoming disabled, loss of a primary income provider and of course identity theft, which is becoming less rare. Is spite of the changes implemented in bankruptcy law in October of 2005, making it more difficult for individuals to qualify and discharge their debts through bankruptcy, the number of bankruptcy filings seem to have kept up the pace.

Bankruptcy alternatives become less feasible

Although bankruptcy alternatives have always been encouraged, the current bankruptcy trends provide proof that it has become less effective for individual filers to properly rely on bankruptcy alternatives such as debt consolidation, credit counseling or negotiating directly with their creditors.

The pressure that creditors put on debtors only adds to their inclination to end it all by going with the one option that can and that is by “filing bankruptcy”. Even after making the decision of filing bankruptcy, individuals become weary of the fact that bankruptcy is a decision that will impact their lives severely in terms of credit worthiness.

The most common alternative to bankruptcy is usually debt consolidation, however this often results in an even larger problem for the debtor as these types of programs often carry high fees for the service. Also there are a lot of companies that often pose as non-profit companies helping people to get rid of their debt through debt consolidation but in fact have a number of hidden fees and leave the debtor with even more debt.

Realistically the best option today for someone who’s heavily burdened by consumer debt and have little or no income, is bankruptcy chapter 7 in which all unsecured debts can virutally be wiped out. For consumers who have assets they want to hold on to and have predictable and stable income, the best option is bankruptcy chapter 13 where their debts can be restructured for easier more manageable payments.

After getting your bankruptcy discharge you need to prepare to tackle the task of making sure that credit entries in your credit report are not still showing delinquent accounts. Anything that should have been included in bankruptcy needs to be labeled as such. About 3 months after your bankruptcy discharge you need to take a close look at your credit report and fix any erroneous entries. These can cause trouble for you down the road qualifying for credit, loans, jobs etc.

You’ll be able to get your credit report from all three credit bureaus by visiting Annual Credit Report, everyone is entitled to a free credit report per year. When you get your report you are very likely to find accounts that have not been cleared after filing bankruptcy. It’s common for creditors not to bother to make these updates especially since they’re not getting paid, they’re certainly not interested in doing any favors. However, you must correct these errors yourself.

Repairing your credit report after filing bankruptcy

Ideally you’d want to wait from 3 to 6 months to get your credit reports and start spotting anything that should have been included in bankruptcy. If you find that accounts that should now be closed are still open and delinquent, then what you need to do is make a copy of your bankruptcy schedules and discharge documents and start a dispute with the credit reporting agencies (Transunion, Equifax and Experian). Your discharge papers are the key to get this resolved. This can also take sometime since the verification process is slow.

Hiring credit repair services will work better for anybody, it’s definitely a good option, just be ready to provide your bankruptcy documentation. Credit repair agencies are more effective at doing this, however you must take care to hire only a legitimate credit agency for this industry is filled with scams.

Bounce right back after bankruptcy

Repairing your credit is only one aspect of getting your financial life back on track. You have to now work a little harder to convince creditors that you’re still worthy of getting credit. Even after you get your credit entries corrected, you should know that your bankruptcy file will remain on your credit report for up to 10 years, however that big dark cloud can being to dissolve with positive credit entries that you should be striving to achieve.

There are several ways to regain control of your credit after filing bankruptcy, depending on what you want to accomplish, be it a mortgage, auto loan or a credit card. Your credit report must accurately report your financial history for you to begin rebuilding. Once you do that there many programs that offer bankruptcy credit cards, personal loans and mortgage loans after bankruptcy. Read the post on Getting a mortgage after bankruptcy for more info.

This is more of a myth than most people realize, the fact is that it is definitely possible to get a mortgage loan after bankruptcy. Sure, getting to a stage in which lenders will consider you again is still a bit tough, but generally the belief is that since personal bankruptcy stays on your record for up to 10 years you have to wait that long to get a mortgage loan or consumer credit again. It’s not that way at all. Credit after bankruptcy is possible when you take back control of your personal finances by implementing rigorous changes for repairing and bringing your credit to a healthy state again after bankruptcy.

Getting the necessary credit for buying a home after bankruptcy just requires you to know how. It’s true that filing bankruptcy deals a devastating blow on your personal credit, but the effects of bankruptcy can be overcome with an aggressive campaign on your part for rebuilding your credit properly and legally. When you apply for a mortgage after bankruptcy, you need to make sure your lender has in front of them a solid record of consecutive positive entries in your credit report. This should include a reference from your current landlord and rental receipts that prove that you made your monthly rent payments on time for at least a year.

Cleaning up your credit report after bankruptcy

This is not an invitation to hire a credit repair agency and attempt to delete your bankruptcy record from your credit report. Remember that you only have the right to dispute true inaccuracies in your credit report, if all else is accurate disputing them with the help of an agency may prove expensive and ultimately useless.

If you really want to qualify for a mortgage loan after bankruptcy, it’s imperative that you clean up your credit report. Meaning that you need to get copies of your credit report from the three credit bureaus and study them side by side making sure that accounts that were discharged in bankruptcy are not still labeled “defaulted” “open” or “overdue”, even if your creditors are not collecting from you, these are the red flags that will keep you from getting a mortgage loan. If this is the case for you, start by using the dispute systems from the three credit bureaus. You should also have copies of your personal bankruptcy discharge papers ready to send to the bureaus if they require them.

Another good way to being ranging high enough for a mortgage after filing bankruptcy is to get a bankruptcy credit card or a secured credit card. You’re going to need two types of payment history to successfully rebuild your credit and they are “installment credit” and “revolving credit”. When you show installment accounts in your credit history these will include current mortgage loans, auto loans, student loans etc. Revolving credit is typically unsecured credit, however qualifying for unsecured credit after bankruptcy is a bit tough, so a secured credit can be a great option. With a secured credit card you will only be able to spend up to the credit limit set by the amount you deposit in the credit card account. So it’s a prepaid credit card basically and it may seem like a burden to send money to a credit card company so you can spend it later, but it’s an important step in qualifying for a mortgage loan again after filing bankruptcy.

Other tips for getting a mortgage loan after bankruptcy

As mentioned above, you would want to show installment accounts on your credit report, this will server as a great reference and increase your chances of becoming a better prospect to mortgage lenders. However, car payments and the interest rates attached to car loans are typically high if you’ve been bankrupt. You have to realize that in order to qualify a mortgage after bankruptcy, your debt to income ratio will be the deciding factor. The lender has to make sure that you have the needed income to make your monthly mortgage payments again and then some. So resist the urge to buy a new car and ignore the recommendations from auto loan companies that this is a good way to rebuild your credit. It is only if you have enough income to cover a mortgage loan after the fact, that you should consider financing an auto purchase.

Pay your monthly bills on time. You can not afford any more glitches or blemishes on your credit report. Being able to get credit after bankruptcy is all about continuous positive entries in your credit report and nothing else. This applies not only to your consumer debt accounts but your rent, utilities, and any other obligations you have. Mortgage lenders will be more inclined to dig a little deeper if you have filed bankruptcy and are trying to qualify for a mortgage again, so show a good trail of positive credit entries and life after bankruptcy will simply get easier as you begin to regain the trust of lenders again.

If you have been paying your bills on time and are ready to apply for a mortgage loan again, another reference that can give you some leverage in qualifying for that loan is to have a letter of credit from the non-traditional credit companies such as your utilities companies, hence the reason why you must always make these payments on time as well. You can include your cell phone company, your electrical and cable companies, it’s as simple as contacting them for a letter of credit and as long as you have a positive record with them, it should not be a problem.

Finally, you may also be required to give a larger down payment on your new home before you can qualify for the mortgage loan, this can be an obstacle if you don’t have 20 to 30 thousand worth of liquidity to finance your purchase. You may be give the advice to borrow the money from you 401k, IRA or other retirement account, which is not uncommon for buyers who want a mortgage loan after bankruptcy, but it’s a decision that you should consider carefully, since you may have to pay back the money you borrow from your retirement account, otherwise you’d have to cash it all out and pay the tax and penalties as well.

If you’re in financial stress, there are several reason why you should consider taking a free evaluation with a bankruptcy attorney, and one of the most important ones is that you need to accurately find out right now where you stand financially. A bankruptcy consultation can clear a lot of doubts about the process. It is during this initial consultation that your attorney can run the bankruptcy means test for you, this is the determining factor in whether first of all you qualify to file for bankruptcy or not, once that’s determined further calculations of the means test can specifically tell you which bankruptcy chapter you’re eligible for.

Other things that can be revealed and may surprise you to find out during this consultation is that there are certain debts that can not be discharged under any bankruptcy chapter. These include tax arrears, child support payments, judgments against you and student loans to name a few. This is a very important reason to consult with a professional bankruptcy attorney, since most people can not make this determination on their own. If your case consists of mostly these kinds of debts then it’s possible that bankruptcy protection is not possible for you, instead you may consider debt consolidation under a different type of service.

Filing chapter 7 vs chapter 13

If have you considered bankruptcy but are not familiar with how it really works, you may be under the impression that by filing bankruptcy you’ll end all your financial troubles. Again, this is the reason why a bankruptcy evaluation with an experienced attorney is necessary. As mentioned above, during your evaluation you will find out which chapter best suits you after your attorney runs the means test on your case. This will depend on whether the bulk of your debt is secured or unsecured debt and whether you have the necessary disposable income.

There are very significant differences between chapter 7 vs chapter 13 bankruptcy, mostly in that in chapter 7 bankruptcy you get to discharge your unsecured debts and in chapter 13 you simply rearrange your debts into more manageable terms of repayment. Under chapter 13 your debts can be reduced and as long as the bankruptcy court and trustee accept your new terms of repayment then you will get a discharge once the debts are paid off.

All of this information will be better explained by a bankruptcy attorney in your area, you do not need to struggle with learning the bankruptcy code and attempting to apply the laws to your case on your own. Even if you do not end up filing with the help of a bankruptcy firm, you will get a lot of insight into the process by taking advantage of a free bankruptcy evaluation. Many law firms offer free evaluations and one on one consultations so take the time to find a reputable firm and bring your case to be evaluated you’ll gain a wealth of knowledge in the process.

To take advantage of a free bankruptcy evaluation now, visit legal helpers and fill out a simple online evaluation form, you’ll then be contacted by a bankruptcy attorney in your area to get your process under way. Visit our review page for legal helpers.

Without bankruptcy protection you have nothing to help you stop your mortgage lender from repossessing and foreclosing on your property if you’re behind on payments. Bankruptcy law can stop the foreclosure process at anytime before the sale occurs, typically you’d want to file bankruptcy chapter 13 since this chapter will allow you to reach a new agreement for paying the arrears on the mortgage. Chapter 13 makes more sense for filers who want to keep possession of a particular asset such as home. No part of your loan balance or past due payments will be discharged, this will only allow you catch up on payments.

Discharge credit card debt and other unsecured debts

When settling credit card debt with your creditors proves to be impossible because of the terms they impose, consumers have the option of filing for chapter 7 bankruptcy in which typically all unsecured debts may be discharged. Discharging unsecured debt is a way to get a fresh start, if the debt can not be discharged because the means test does not back up the level of financial hardship, the debt can be reorganized under chapter 13 bankruptcy instead with a new repayment plan that normally let’s you, the filer, come up with the repayment plan.

Stop Wage Garnishment

When judgments are brought against you by your creditors or collections agencies, one of the many weapons they use to collect payments from you is wage garnishment. This typically means that a percentage of your salary is legally withheld by your employer to send to the collectors. This percentage is not usually something that you determine but it is decided by the collectors and this often creates serious financial complications for the debtor. Filing personal bankruptcy will end of all of this, restoring the full transfer of your earnings directly to you. Early in the process of filing bankruptcy it will be determined whether you’ll benefit from either chapter 7 or chapter 13 bankruptcy, then ultimately the outcome will be that either you get a discharge of your unsecured debts or a rearrangement of your total debts under a new repayment plan, but either way the collectors no longer have the right to garnish your wages again.

Filing for divorce

When you or your spouse file for divorce the marriage may end up with a pile of assets and debts, usually more debts than assets for the average American family. Filing for divorce and dividing up the assets and debts may leave one of you with more than your fair share of debt and not enough assets. Normally you would want to file for divorce first and then file bankruptcy, however it’s best to get a bankruptcy attorney’s opinion on this. Depending on which state you are in, all assets may be considered community property and used in the bankruptcy estate, otherwise only jointly held assets can be used, then individually held assets may be used to pay for the debts inherited after the separation. Bankruptcy law and divorce law are not under the same federal code, so it’s important that you seek professional help to accurately file for both.

Being the victim of identity theft

This is perhaps the worse situation to be in, having your identity stolen, not having the adequate protection to restore your identity and clear your name, bankruptcy can be an option. However, this is only if your disputes are rejected by your creditors and you have no way of proving that the fraudulent charges were not made by you. Depending on how long and how much was charged with your accounts you could end up with a huge collection bill. As a victim of identity theft you have rights and you should contact the Federal Trade Commission, should you become a victim of identity theft and find yourself in a situation where no creditor will entertain your dispute. In this case you should only file bankruptcy if you have no other way to stop creditors from collecting from you and you have no way of proving that your identity was stolen and used by someone else.

There are many other reasons to file bankruptcy and they’re typically very unique to each individual, but the most common reason is still large amounts of credit card and unsecured debt. There are also other reasons that can be beyond your control like the divorce, a death in the family where the primary provider passes on leaving a single parent to provide for children, having your identity stolen and not being able to resolve the fraudulent charges. These are special circumstances but are not that rare.

As always remember that bankruptcy should be your last resort, if you have already exhausted every option and have found no real alternative and no feasible way to come out of debt, then begin your research phase and understand what chapter 7 and chapter 13 are all about and how they can help you. Also take advantage of a free bankruptcy evaluation by simply contacting bankruptcy attorneys in your area or filling out an online bankruptcy evaluation form to get connected with an attorney in your area.