Before you declare personal bankruptcy, there are a few things you should keep in mind. Personal bankruptcy is a serious financial step which you should not take lightly, and you should always look into other alternatives before filing your request with the bankruptcy court. That’s not to say that bankruptcy is not a viable option for many individuals. It just means that you should be careful to make the best decision possible for you and your family.

The first thing you should realize is that there have been some changes to the bankruptcy law. Congress passed a law in 2005 which makes it more difficult (but not impossible) for some people to declare personal bankruptcy. The idea is to make sure that you really are struggling financially and cannot afford to pay your bills before allowing you to file chapter seven.

Chapter seven bankruptcy, by the way, is what most people think about when they hear the term bankruptcy. The point of chapter seven is to try and wipe out your debts without any kind of repayment plan. The new bankruptcy law established a means test which means that you have to go through a more intense process in which you document your income and expenses. If your income is less than the median income for your state, then this test will not apply to you because it is obvious that you don’t make much money.

However, if your income is higher than the median for your state, then you’ll have to go through the means test to prove that you really need bankruptcy. In the end, most people that would have qualified before will probably qualify even under the new law. It simply will create more of a hassle for you and your lawyer, and there are other requirements such as mandatory financial counseling.

If you do not pass the means test, you’ll have to file chapter 13 bankruptcy which creates a repayment plan for the next 3 to 5 years.

Before you declare personal bankruptcy, you should remember that it will have a significantly negative impact on your credit rating (although this might not be your priority if you are really struggling financially). There’s certainly life after bankruptcy, but filing chapter seven or any other bankruptcy is still a serious and difficult step to go through. For more articles like this bookmark www.HowToFilePersonalBankruptcy.info

Author: Josh Ramos

In an earlier post, I wrote about some of the first steps to bankruptcy that you need to think through and walk through before making the decision to move forward with your bankruptcy.   After reconciling those issues, you will need to make contact with a personal bankruptcy attorney to set up your initial consultation.  Most personal bankruptcy attorneys will offer a free consultation, you need to come prepared to make the most of this free information. 

Also, remember, the only way to truly make the attorney/client relationship work to your benefit is to be honest and detailed.  First of all, you need to be honest with your attorney about your debts and assets as you could face fraud charges if you do  not fully disclose your information accurately to the court.  Secondly, your attorney is your advocate, and you need to give the honest and clear picture to your attorney so they can best counsel and represent you.  Lastly, this is not the time to feel ashamed, or guilty in some way that you have found yourself in this situation.  This is the time to take action, and honest and clear action is the way to get you a fresh start.

Here are some steps in how to best prepare for your consultation:

1.  You should have your last two months of paystubs, or more if you have had a recent salary change, change in income due to downsizing or job change.  You need to be able to assess your current salary or wages, if they have fluctuated recently, and what you anticipate your income to be in the near future.  Your income must include every source, including any side businesses or other income streams.

2.  You should have your last two years of income tax returns. 

3.  You should bring in a file of organized statements of your debts, or a spreadsheet if you currently manage your debts on a spreadsheet program.  I would recommend having your statements divided up as:

Home ownership debts, like your mortgage, second mortgage, rent, etc.

Car payments or leases

Credit card debts

Business debts, if you are a small business owner

Student Loans

Medical debts

Miscellaneous debts, if you make payments on a boat, RV, etc.

You will need a clear picture of what your minimum monthly payments are, what your outstanding balances are, etc.  You should be able to demonstate clearly if and how you are unable to manage the total of those payments.  This is where often consumers need to dig deep, deal  with all of their debt in the light of day and honestly face the facts.

I also recommend that you have them specifically divided up as you will need to speak to the debts that are related to items that you need to survive, like your home, or your car.  The other debts you may have to live without, and you may actually have to relinquish those items.  You will most likely have to walk away from those credit cards, and depending upon the bankruptcy laws of your state, you could stand to lose a boat or another luxury type item on which you still owe money.

4.  You should have a spreadsheet or some kind of statement that lists your key and significant assets.  Your assets may include:

Equity in your home(s)

Vehicles you own outright

All bank statements with current balances

401k and other investment accounts

High value art, jewelry, antiques, high end fashion accessories, etc.

Timeshares or other vacation-type memberships that you pay each year

Additional vehicles, “toys” (such as RV, motorcycle, ATV, boat, jet ski, etc.)

Fractional ownership of any large ticket items such as a jet, plane, boat, timeshare, etc. 

Trust funds, family trusts

In many cases, many consumers do not have high ticket assets to disclose, however, you should do your best to be honest and specific.  You do not want to run the risk of any kind of disclosure in the bankruptcy process that could look fraudulent or otherwise. 

5.  You should also have a file that details your monthly utility payments and other reasonable monthly expenses.  Again, creating a spreadsheet of what you pay for groceries, gas, utilities, medical expenses, insurance expenses, clothing, etc. is important information for you and your attorney.  Adding your basic monthly expenses to your debt load will bring a clear picture to you and your attorney regarding a potential bankruptcy.

6.  Have a file that includes any other obligations and payments that you make, to include:

Child support

Spousal support

Taxes, if you are on a payment plan with the IRS or pay your taxes on any other schedule

Payments for personal loans from family and or friends

The bottom line is that once you have cleared the hurdle of the first steps to bankruptcy, it is time to get to the honest and brutal facts of your finances.   Let’s face it, all too many consumers juggle there expenses and income from month to month, not always really realizing what goes into each and every expense and dollar that they spend.

And, truly, if the brutal facts of your financial picture is overwhelming, unmanageable and making you literally and figuratively sick, bankruptcy may be your only options.  There are alternatives to bankruptcy, and you may be able to avoid bankruptcy, and with the most detailed information you can provide to your personal bankruptcy attorney, you can figure out truly what the best option and decision is for you, for your family, and for your financial present and future.   The past is just that, the past.  Focus on the future to create the path on how you are going to move forward.

Bankruptcy is not something done on a whim but is a very serious financial consideration and decision. Understand how to file bankruptcy so that the outcome as determined by the court is something that you can live with, instead of potentially putting you into an even worse situation.
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