With the fragile state of America’s economy today, more and more people are being forced to declare bankruptcy. Oftentimes, a person does not voluntarily choose to file for bankruptcy; they can actually be forced to file by their creditors. Hence, we shall cover a few bankruptcy basics, as well as why you must use a lawyer to file for bankruptcy.

At this point, you are probably wondering why you would use a lawyer to file for bankruptcy. Obviously, if you have to claim bankruptcy, you don’t have any available money lying around.

However, because of the recent bankruptcy rule changes, you are required to use a lawyer during the bankruptcy process. Even though it doesn’t seem fair, the law is very specific in this regard.

When it comes to actually filing for bankruptcy, there are several chapters that you can file under. However, the majority of people will file under either Chapter 7 or Chapter 13. The other chapters deal with small business, farmers, and other odds and ends.

Chapter 7 bankruptcy is where the court appoints someone to liquidate your assets. This representative will sell off your assets and then use the money obtained for the sale of these assets to pay off your creditors. Any debt left over will usually be eliminated by the courts.

On the other hand, Chapter 13 bankruptcy is where the person filing the bankruptcy has to comply with a repayment plan. This plan, which covers a 3 year period, is designed to permit you to pay off your creditors. After the 3 years are over, any outstanding debts are forgiven by the courts.

For many people, bankruptcy seems to be the cure all for their financial situation. However, bankruptcy can not discharge either taxes or student loans. Therefore, we recommend that you very carefully consider the impact of student loans on your life. If you borrow money, you will have to repay it.

As you have seen above, bankruptcy can be a very useful tool, when warranted. As a note of caution, bankruptcy will remain on your record for up to 10 years. Therefore, you should contact a counseling credit company (make sure it is reputable and not a debt consolidation company) to explore your options before deciding to file bankruptcy.

The Bankruptcy Guide was established to help people learn about the various facets of bankruptcy.