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.The new bankruptcy law mandates consumers to complete a credit counseling course at least six months prior to filing. The purpose of going through credit counseling is to help consumers find alternative solutions to debt instead of bankruptcy.

The credit counseling agency accredited by the government would be the one to decide whether bankruptcy is the best option. If the credit counseling agency recommends bankruptcy as your only option, that’s the time a borrower can start the bankruptcy application process.

Filing for Bankruptcy
Preparing the bankruptcy application is also a complicated process. It is recommended to hire assistance from a bankruptcy attorney to ensure that all the documents would be filled out correctly.

It is interesting to note that any false information provided in the bankruptcy application is considered as a violation. For this reason, bankruptcy lawyers have increased their service fees due to the greater responsibility assigned to them.

The Qualification Income Means Test
Once your bankruptcy application has been submitted, the applicant would need to go through the “Income Means Test”. This test will determine as to what Chapter of bankruptcy the applicant falls under. The Qualification Income Means Test is based upon the borrower’s monthly income and capability to pay off debts.

If you qualify for a Chapter 7 bankruptcy, you will be released from all your payment responsibilities to creditors. On the other hand, those who don’t qualify for a Chapter 7 bankruptcy will be subjected under the Chapter 13 bankruptcy.

This chapter of bankruptcy puts the borrower under a repayment program for a certain time period. The bankruptcy State court will set a specific percentage of salary deduction depending on the borrower’s capacity to make repayments and on the extent of debt.

The Consequences of Bankruptcy
Whether you qualify for a Chapter 7 or Chapter 13 bankruptcy, remember that this record will remain in your credit report for up to seven years. Such a record can become a disadvantage especially when acquiring personal loans or when applying new credit.

Is It The Right Time For You To File For Bankruptcy?
By: Smith Andrea