Even with the new bankruptcy laws, filing for bankruptcy can provide some advantages, if done correctly in the right situations. Bankruptcy has historically been viewed as a financial mechanism where one can wipe the slate clean and start over, based on mountains of financial obligations that are seemingly too high to ever be paid in full.

The new bankruptcy laws make this process much more difficult than it used to be. One big reason that the new bankruptcy laws were put into place is because, like almost anything else where there can be a consumer benefit derived from it, maybe people were abusing the bankruptcy system. They would amass a huge pile of debt, then file bankruptcy to wipe their financial slate clean, then start over at the same place and do the same thing over and over again. Such a scenario is no longer possible with the new bankruptcy laws.

Some things do not change. If you have financial obligations and do not pay them, either as a consumer or as a business, there are things that the creditor can do, which of course includes the harassing calls, just short of downright “threatening” in nature, that you may have received or may even be receiving today. If the payments are not made or some alternative and mutually agreeable situation is not worked out, then the creditor has every legal right to name you in a lawsuit. Such lawsuits are common and are designed to protect the creditor who gave money, goods, or services in good faith that he would indeed be repaid.

You do not want or need the stress that accompanies umpteen phone calls on a regular basis from the collections department of your creditors, with each call being less friendly than the last one. You already know what kind of financial situation you are in, and their constant hounding only serves as a reminder of that – a reminder that you probably do not need, which only serves to increase your stress level.

After you have filed your bankruptcy petition in federal bankruptcy court, you are given automatic protection from creditors. If a creditor calls you after you have filed your bankruptcy petition, you must tell them that you filed for bankruptcy and can even give them the case number, although you are not required to do anything more than to let them know that you filed bankruptcy. Since bankruptcy case records are open to the public, your creditor can easily enough find out your case number anyway.

If a creditor calls you after being told that you have filed bankruptcy, be very nice about it, and get their name, their phone number, the date and time of the call, and what creditor they are representing. Now you have some clout because that creditor is in violation of federal law. There have been some cases where a consumer’s debt with a creditor in this situation was wiped clean because the consumer now has every right to file a suit against that creditor for his violation of federal law.

Yes, there are some advantages to filing for bankruptcy, although bankruptcy should still be viewed as your last resort option, used only after all other viable options and alternatives have been exhausted.

Bankruptcy is one option to consider in order giving yourself a “fresh start,” when you have more debts than you have assets. There are in fact many types of bankruptcy provided under the law but the most common is Chapter 7 bankruptcy, which is also known as liquidation.

When filing under Chapter 7 bankruptcy, all your assets, excluding those that are exempt under the law of your state, are dissolved and liquidated. Generally, the person tasked to do this is the court-appointed official, called a trustee.

All in all, the vital task of the trustee is selling your properties and using the proceeds to pay your creditors. After doing such, the court will then cancel many of your remaining debts, thus affording you a “fresh start” to life.

Here is a step-by-step guide to filing a bankruptcy under Chapter 7 bankruptcy:

Step 1: Decide whether you should file bankruptcy or not.

Filing bankruptcy is a personal decision, influenced by many factors, such as the amount of serious debts and your ability to meet the original payments or pay the full amount. For starters, when you are broke, it is never a nice experience getting harassed by creditors for debts incurred. For another, your decision to file should not be made for the sole purpose of putting a stop to your demanding creditors.

This is a significant point as secured creditors may apply for “relief from stay,” thus allowing them to continue their efforts to repossess or foreclose even though you already filed for bankruptcy.

Step 2: Get an attorney

While the law on Chapter 7 bankruptcy does not need individual consumers to hire an attorney who would represent them in court, it is still advisable to ask for legal help, particularly concerning critical decisions involved in bankruptcy.

Step 3: Comply with the legal requirements.

File your petition with the bankruptcy court serving in your area. If you are a business debtor, then file with the bankruptcy court in the place where the business was organized or has its principal place of business or principal assets. Your attorney should be able to advise you on how to deal with these required legal forms.

Step 4: Pay the necessary fees.

As with any other court cases, there are certain fees required, such as:

• Case filing fee

• Miscellaneous administrative fee

• Trustee surcharge

Upon filing, you are usually asked to pay these fees to the clerk of court.

Note that the number of installments is limited only to four. Additionally to that, you are also required to make the final installment no later than 120 days after filing the petition.

Step 5: Notice to the creditors and meeting.

After filing your petition for bankruptcy under Chapter 7, paying the necessary fees, and complying with the legal requirements, an “automatic stay” is granted to you by operation of law. This stay will efficiently stop most collection actions against you and your properties. This means that as long as the stay is in effect, creditors cannot initiate or continue lawsuits, wage garnishments, or even telephone calls demanding payments.

After the bankruptcy case has been filed, the bankruptcy clerk will give notice to all creditors whose names and addresses you provided. Then, the case trustee will hold a meeting of creditors between 20 and 40 days after you filed your petition.

Step 6: Cooperate with the trustee.

The case trustee has a vital role in a bankruptcy case. His primary responsibility is to liquidate your nonexempt assets in a manner that maximizes the return to your unsecured creditors. He does this by selling your property, if it is free and clear of liens and as long as it is not exempt, or if it worth more than any security interest or lien attached to the property and any exemption that the debtor holds in the property.

In view of the broadness of a trustee’s power, it is significant therefore that you cooperate with the trustee. Provide any financial records or documents that the trustee requests and answer questions, which the trustee is necessary to ask at the meeting of creditors under the Bankruptcy Code.

Step 7: After the discharge…

If all goes well with your Chapter 7 bankruptcy case – that is, no one files a complaint objecting to the discharge or a motion to extend the time to object – the bankruptcy court will issue a discharge order relatively early in the case, about 60 to 90 days after the date first set for the meeting of creditors

A discharge order is an order issued by the bankruptcy court, releasing you from personal liability for most debts and preventing your creditors from taking any collection actions against you. As a rule, excluding cases that are dismissed or converted, individual debtors receive a discharge in more than 99 percent of Chapter 7 bankruptcy cases.

For someone filing under Chapter 7 bankruptcy, a discharge of almost all of your debts is the ultimate goal. With the release of all your debts and creditors stopped from pursuing any further collection actions against you, the opportunity for a fresh start is apparent.

History: Continued

Since such banking practices were common in Italy, it has been suggested that the Italian words banco rotto, or broken bank, represents the true meaning of the term bankruptcy. Alternatively, some derive the word from the French banque, or table.

Finally, it has been possible to identify the origin of bankrupts from the ancient Roman mensarii or argentarii. They placed their tabernae, or table, or mensae in public places and conducted their business. Should they decide to flee with the money that had been entrusted to them, then all that would be left would be the sign marking the spot where they had conducted their business.

In 1557, 1560, 1575 and 1596, Phillip 2nd of Spain was forced to make public that four separate state banks were insolvent, and so Spain was the first country to declare bankruptcy.

In 1705, a statute was introduced into Anglo-American bankruptcy litigation. Accordingly, should a bankrupt make every effort to repay the outstanding debt, he would be rewarded with the discharge of the outstanding sums.

There is documentary evidence that bankruptcy was commonplace in the Far East. According to a law laid down by Genghis Khan, there was a clause that established the death penalty for anyone who became bankrupt three times.

Current Practices

In the past, for those businesses or individuals who found themselves in a position in which continued trading was not possible, there was little alternative but to close down.

However, things have moved on from this archaic and matter-of-fact treatment. The emphasis today is on restructuring the outstanding debt. This means that the original debt is reviewed in order to determine if there was any means whereby more favourable terms could be secured, so enabling trading to be maintained. In essence, therefore, the focus is on the remodeling of the financial and organisational structure of the debtors experiencing financial distress.

Bankruptcy fraud is classified as a crime. Under current laws relating to bankruptcy, typical common criminal acts include assets which have not been notified to the authorities, relevant documents which have been deliberately destroyed or withheld, various forms of conflict of interest, claims that have been knowingly misleading, false statements or declarations, and fee fixing or redistribution arrangements.

Where bankruptcy forms contain information that has been found to be false, this my lead to a charge of perjury, which is the act of lying or making false statements, that can be verified, on a material matter under oath in a court of law. Filing more than one petition for bankruptcy may not in itself be a criminal act, but it may well violate provisions of bankruptcy law.

In the U.S, laws relating to bankruptcy fraud are particularly focused on the mental state of the participant. Under established common law, the guilt or innocence of a person rested on whether they had committed the crime, and whether they intended to commit the crime.

Bankruptcy fraud is completely different from strategic bankruptcy, which itself may occur when an otherwise solvent company makes use of the bankruptcy laws for some specific business purpose. Although the latter is not designated as a criminal act, it may still act against the filer of the bankruptcy petition.

Bankruptcy – How To Succeed

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Only a few short years ago, it used to be fairly easy to file bankruptcy, almost as easy as it is in the board game of Monopoly, where the ramifications of doing so were about the same as in Monopoly. But it was determined that so many people were taking advantage of bankruptcy to compensate for a lack of financial skills, a lack of money management, and basically attempting to lead a champagne lifestyle on a beer budget that the bankruptcy laws were recently changed.

To be sure, the bankruptcy laws still vary from state to state, but there are some things that even state legislature cannot disagree on if they conflict with the federal bankruptcy laws. Even at this, some people have attempted to file bankruptcy in a state that may have more lenient bankruptcy laws than the state in which they have listed as their address of residence, and one of the things that the new bankruptcy laws is doing is ensuring that people who file bankruptcy do so in the state in which they live.

Another requirement of bankruptcy with the new laws is that the person filing bankruptcy is required to attend credit counseling sessions and financial education courses. While this is still part of the law and you can expect that requirement into the foreseeable future, studies are starting to show that such a requirement has so far failed to deliver the positive results that were expected, and in fact have delivered very few significantly measurable benefits to the consumer.

Is there a value to requiring consumers to spend (or as some say, “waste”) their time on credit counseling and financial education courses before being allowed to file bankruptcy? Many are saying it makes no sense at all. On one hand, the advocates who say it makes little sense are right, since by the time a person is so far in financial distress that bankruptcy is their most viable option, the time for financial education and credit counseling has long since passed. But on the other hand, how do you require someone to attend those classes and counseling sessions BEFORE they get into a bankruptcy situation, since the vast majority of people are unwilling to admit, even to themselves, that they are heading in the wrong financial direction.

Good consumer information about bankruptcy is one answer. While the government or the state cannot protect each and every consumer from financial folly, nor can they force the consumer to attend courses or counseling, they can put the monkey on the consumer’s back by making information about bankruptcy available, perhaps even at no charge. The vast majority of consumers have no clue about the various chapters of bankruptcy and which one they should choose if they get into a bankruptcy situation.

Moreover, most consumers think of bankruptcy as their only option, when in reality the act of declaring bankruptcy should be the option of last resort. There are many viable alternatives to bankruptcy, most of which do not have the long-lasting negative impact on the consumer, such as the fact that bankruptcy stays on one’s credit report for the next 7 to 10 years. Consumers should be taught about the options that are available before considering the “act of last resort”, which is bankruptcy. For example, debt consolidation firms can pull a consumer out of the financial fire without requiring bankruptcy in many situations.

Consumer education about bankruptcy is paramount, and every consumer should make a point to understand at least the basics of bankruptcy, what it means, how it works, and most of all, what viable alternatives to bankruptcy are available.

Research at The Debt Line has shown that up to 1 million people are on the verge of declaring themselves bankrupt as they struggle to cope with thousands of pounds worth of debt.

Bankruptcy is an option that often has to be considered when an individual cannot pay their debts as they fall due. A first time bankrupt with debts will generally receive their discharge one year after the date of the bankruptcy order.

Bankruptcy is the most drastic method available for dealing with debts you cannot pay. It can however set you free from overwhelming debts so you can make a fresh start, and makes sure your assets are shared out fairly amongst your creditors. However there are many implications of bankruptcy. During your bankruptcy you will be subject to several restrictions, which can be avoided through an alternative to bankruptcy such as an IVA. Anyone can go bankrupt, and there are different insolvency procedures for dealing with companies and for individuals who become bankrupt.

Applying for an IVA is a regularly looked at as an avoidance from bankruptcy. The IVA enables you to cut your debts to an affordable level and clear them over a fixed period. The compromise should offer a larger repayment towards your debt than could otherwise be expected were you to be made bankrupt. You can even take out a fresh mortgage while in an IVA. What’s more, it is a totally private arrangement – nobody needs to know about it apart from you, your advisors and your creditors. An IVA ensures that your home is protected and your job is not at risk and with The Debt Line an IVA can write off up to 75% of your debts.

There are so many advantages of an IVA. For example, there is not the stigma or the publicity that normally accompanies bankruptcy and the debtor can continue to trade in a business to generate money. It can give the peace of mind to have a fresh financial start.

The implications of bankruptcy are simple. Some of these disadvantages are: loosing control of your assets, not being able to act as a company director (if you wish to do so), being publicly examined in court and your credit being affected for many years after the annulment. It seems that as far as The Debt Line are concerned, the bankruptcy route could be very much avoided.

One in 8 of those with five-figure debts say they are ‘quite likely’ or ‘very likely’ to declare themselves bankrupt. Also, with an interest rate rise looking more and more definite, these figures are expected to grow. With the help of The Debt Line a growing number of people will be finding alternative ways to get themselves out of debt.