Our Bankruptcy Attorney Blog

For most people, filing for bankruptcy is a major decision that is likely to be more than merely financial. The fact is, filing for bankruptcy is more or less a public admission of one’s failure to meet his obligations and is probably the one of the worst black marks to have on your record, both financially and personally. While some people are more forgiving, for many people the idea of bankruptcy suggests that the bankrupt person is a failure in all respects. Nevertheless, if bankruptcy seems the only way, there are some things to consider.

The first thing to consider is the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). Many people have some old fashioned ideas about what bankruptcy means, what can be exempted, what kinds of debts can be discharged and what you have to do to file. The fact is that the BAPCPA radically altered personal bankruptcy in the United States, making it generally harder to do, less likely to succeed, reducing the kinds of debt that can be discharged and otherwise making it more troublesome for most people. This bill was written directly by the lending industry, transferred to Congress by the lending industry’s lobbyists, and passed on their account. The entire idea is to make it harder to file for bankruptcy and reduce the benefits of doing so.

Examples of important changes introduced by BAPCPA included introducing the requirement to receive credit counseling from an approved agency sometime within six month of filing, adding a means test to determine if you are truly poor enough – by the credit card industry’s standards – to file for bankruptcy, mandating that certain technicalities in the filing process result in automatic dismissal of the case, and adding a number of kinds of debts to the list of those that cannot be discharged by the courts. Therefore, the first thing to look into before filing bankruptcy is to see if your debt can be discharged through the process or not and see if you meet all the new standards and requirements.

Also keep in mind that if you do file for bankruptcy and the case is accepted and debt is discharged, then this will be reported on your credit history for the next ten years. Contrary to some of the claims made by fraudsters online, there is no legal way to have a bankruptcy removed from your personal credit history once the process has been completed. This means that the consequences, as well as a very obviously red flag to almost all potential lenders, will follow you consistently for the next decade.

However, do not let that make you think that you will no longer be able to get credit. One of the things that the BAPCPA did was make it longer – eight years now – before you can file for bankruptcy a second time. This means that once your bankruptcy goes through you will become a prime target to all kinds of predatory lenders that will offer you credit the day you leave bankruptcy court. The idea is that most people that go bankrupt will make the same mistakes again if given the opportunity (credit), except this time they cannot file for bankruptcy for the next eight years. So these people are prime targets for predatory lenders since once they get caught a second time, they have no recourse but to lose everything.

Tags: bankruptcy

You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.