Beware: Is Bankruptcy Your Way Out of Debt?

With today’s economy,   the unemployment rates and the high costs of daily living, it seems almost like a free pass to some when they think of filing for bankruptcy.  Is it an easy way to wipe the slate clean when times get tough?  Well, maybe at one time but not so anymore.  New hoops or regulations were passed in 2005 that makes it more difficult to be freed from the worry of your debts.  One of the new requirements is to attend a Credit Counseling Session that lasts 90 minutes and often you have to pay for this class.

 After that first step, the bankruptcy court makes a determination by using a “means test” to see if you even qualify financially to file for bankruptcy.  Then they will compare your salary to the state’s average to see if you measure up.  If you even make it this far, you are in luck as you have one more financial education class to attend.  This one also costs anywhere from 25-60 dollars and lasts about two hours.  This class must be given by an approved education provider and can be done by web or video; at least that part makes it easy.   And then your lawyer needs to dig deep into your pockets also in order to even start the paperwork.  

Depending on what type of bankruptcy (Chapter 7 or Chapter 13), the costs can range from $600-$2000 plus court costs and must be paid for up front.  After all the requirements and hidden fees, it sure does not sound like an easy way out to me.  However,   for some that are about to lose everything, who are suffering from depression because of the weight of the debt, have had garnishment or repossessions, or there are lawsuits pending against you.  Relief by jumping through these hoops will be finally achieved if you can hang in there and make it all the way through. 

Just remember the seven years on the report is almost a myth as the type of bankruptcy will determine if it stays on there any less than 10 years and most future loans and some job positions require disclosure of previous bankruptcies.  To say no is a criminal offense.  So Beware!