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The cost of bankruptcy declaration, and bankruptcy alternatives

A lot of people are running into financial difficulty these days - especially with a lot of major corporations going through layoffs and buyouts. What this means is that a lot of people find themselves suddenly unemployed and it may take some time to get another good paying job. When financial difficulties come, and they stay around for awhile, the thought of declaring bankruptcy will come into some people's minds - especially when the debt starts getting out of hand, with no light at the end of the tunnel. Here are some thoughts about bankruptcy that will help you to make that important decision of "Should I, or shouldn't I?"

What Bankruptcy Declaration Means

Declaring bankruptcy is an indication that you are not able to pay the debts that you have legally incurred. The legal examination of your bills and the way you handle your finances, as well as the humiliation involved, makes it a rather stressful process. It means that you will have to seek credit counseling, too.

Because so many people are attempting to get out of debt, for one reason or another, Congress passed an act which was signed by President Bush in 2005, to place certain limitations on declaring bankruptcy. This Act, called the "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005", seeks to make it more difficult to declare bankruptcy and to help the creditor to receive a higher degree of compensation. The Act calls for higher bankruptcy filing fees, credit counseling, and making it more difficult to file under Chapter 7, making it necessary for more people to file under Chapter 13 bankruptcy. Many other details are also covered in the Act that place further limitations on bankruptcy declaration.

Two Types of Bankruptcy

Filing a Chapter 13 bankruptcy declaration means there is a "reorganization" of your finances, and means you repay much of your existing debt. You are required to make a plan that enables you to pay back a lot of your existing debt in three to five years. This means the sale of some of your properties (or all of them) in order to satisfy the debt. It is the bankruptcy Trustee who will make the decision as to what needs to be sold - not you.

Filing a Chapter 7 bankruptcy declaration means that assets you currently possess will need to be listed, by requiring you to take a "means test," and then a decision will be made as to what you can keep and what you cannot. Everything will fall under an "exempt" or a "non-exempt clause." You keep the "exempt" items, and lose the rest. The "non-exempt" items will either be sold, or you will be required to pay them back. Some things that are not exempt are child support and education costs.

The cost for bankruptcy declaration can run up to about $1,500 for personal bankruptcy. This includes the filing charges, and bankruptcy lawyer fees. The fees are dependent upon how much of an income you have, and bankruptcy laws vary from one state to another. The process of obtaining a legal bankruptcy declaration, assuming everything is in order, can take up to six months.

For mortgage bankruptcy or small business bankruptcy you should consult with a bankruptcy lawyer or attorney.

After the Bankruptcy Declaration

Once you have obtained a legal declaration of bankruptcy, all of your creditors know where they stand. For some, the debts are discharged, and others have received what will be paid to them, or they know what will soon be coming to them. However, it also means that your credit rates have been destroyed, and it will take years to fully repair it. The bankruptcy is placed on your credit rating and will remain there for the next ten years.

What are some alternatives to bankruptcy declaration?

If you are now in a position where you need to consider bankruptcy, then there are some other options that may yet be available to you.

1. Get Credit Counseling

By this, it means work through a debt negotiation company who will take your case to the various creditors in an attempt to work out some kind of a deal. This could be a good step in the right direction because creditors know that if you declare bankruptcy, then they may not get anything. Oftentimes, they will work with you.

2. Renegotiate Your Loans

Once again, by talking with your creditors, you may be able to renegotiate for better loan terms. This could give you a greater leeway financially that could provide just enough of an edge to enable you to get through it with having to file a bankruptcy declaration.

About the author:
Joe Kenny writes for, a UK personal loans comparison site, visit us today for information on all loan topics including securedloans UK and links to leading UK providers. Our Site: