According to recent bankruptcy facts and statistics, people filing bankruptcy forms for Chapter 7 increased 43% from December 2007 to December 2008. Business bankruptcies increased 54% during that same time period. So far, the month of May 2009 has seen a 40% increase in business bankruptcy filings, including corporate giant General Motors. While it may just seem “normal” to file when over one million other Americans are filing, you should be aware of the inner workings of bankruptcy proceedings before you jump in headfirst.
First, let’s take a look at the most basic bankruptcy facts and what filing bankruptcy forms can and can’t do for you. Consumer law allows you the ability to legally eliminate most — if not all — of your debts through a bankruptcy discharge. This includes all credit cards, medical/hospital bills and some personal loans. If your car has been repossessed or your home in is foreclosure proceedings, court bankruptcy forms will put a stop to these actions. You’ll be able to stop wage garnishment, utility shut-offs and debt collector harassment as well. However, bankruptcy can’t completely absolve a car loan, a student loan or a mortgage payment. It cannot discharge alimony payments, child support payments, criminal fines, IRS tax debt or court restitution orders. Filing for bankruptcy cannot save you from debts you incur after the initial filing and cannot protect your spouse or cosigner.
Another one of the bankruptcy facts you should know is that filling out a few online forms cannot help you if the same problems that got you into that mess are still there. Bankruptcy may give you a clean slate for past debts, but you will not be protected from any debts you incur after your petition has been sent in. So if you got into a world of credit card debt and you’re still using credit cards, then you will find yourself in an even worse position. If credit was the problem, then you should stop using your cards before filing. If unemployment was the problem, then you should try to get some money coming in before you file a Chapter 13 (unless you wish to declare “no assets”). If medical bills were the problem, make sure you won’t need any other major procedures or you’re out of the hospital first. Before you file, consumer law states that you must meet with a credit counselor affiliated with the NFCC or AICCCA regarding your other options.
Here are several more bankruptcy facts to consider. If you are married, then your spouse must fill out bankruptcy document forms as well or all your debt will be transferred to your spouse. If you wish to save some of your assets from an inheritance or savings, then you may put money into an IRA savings account or take out a life insurance policy, both of which are exemptions. Your IRS tax obligations cannot be discharged in bankruptcy so be prepared to continue to pay your federal and state taxes. Even though you may lose some personal property in bankruptcy, you will not be left without a home, transportation or means to survive under the new consumer law.