>????????ou are in serious debt, it would be worthwhile for you to know how to file for bankruptcy and how it will affect your credit. Bankruptcy is something everyone has heard of, and has a vague idea about, but little knowledge about how to go about it or its actual effects.

Before filing for bankruptcy, make sure there are no other options.

Under current United States law, any person filing must receive credit counseling from a person or group approved by the court-appointed bankruptcy trustee to ensure that all other available avenues are reviewed. The law also provides a “means test” to review what capability you may have to repay you debts.

If this legal test concludes it is feasible for you to repay, you may be forced to file under Chapter 13, instead of Chapter 7.

Under Chapter 7, most of your assets are sold to make partial payment on your debts and the rest are written off, with the creditors being prohibited from seek any further repayment. It can stay on a credit report for up to ten years, though seven is typical.

Your attorney must certify that what you say in the documents you use in court, including your income, is true.

This negative impact on your credit can be reduced with some sensible financial practices. Making all bill payments on time can be a large help, as most lenders look to the last year or two as an indicator of creditworthiness.

A secured credit card, which is credit backed by a bank account, can also be a large help in restoring credit after bankruptcy. It may be wise to start the credit restoration process as early as possible.

Not all legal assistance is created equal. You should retain a lawyer who clearly understands how to file for bankruptcy and how it will affect your credit. Just like you would want a specialist physician to perform a major surgery, you should find specialist help that understands the process and ramifications of your decision.

Once assistance is retained, refer all of your creditors to your lawyer. After your case is filed, they may not contact your directly, under threat of financial and legal penalties.

If you are considering filing for bankruptcy, do not use your existing credit lines or seek to expand them, or else the court may exempt that “system gaming” from the bankruptcy write-offs.

After filing a petition with the court, you will be required to hold a creditors meeting and a trustee will review your assets to determine what is eligible to be sold (Chapter 7) and if you are able to work with a payment plan (Chapter 13).

After these steps are finished and the results returned to the court, a decision will be made about what debt should discharged. After that, your creditors have sixty days to challenge the decision regarding any particular account.

Certain debts cannot be written off in a bankruptcy. These include child support, student loans (except in severe circumstances), taxes (federal, state and local), and debts arising from driving under influence (DUI).

Knowing how to file for bankruptcy and how it will affect your credit before deciding to file can save you a lot of trouble and confusion.

If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!