Declaring Yourself Bankrupt - The Facts


We live in an age of easy credit. Ok, the banks and financial institutions have caught a cold in recent years making obtaining credit harder to obtain, but for many people a worldwide recession combined with high personal borrowings and credit card debt, has resulted in real financial difficulty.

Credit cards have played a major role in this. We all know how easy it is to live beyond one's means by supplementing our spending with credit card debt. The problem is that it has to be paid at some stage, and for some, just the monthly interest is more than they can afford.

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Simply transferring debt to a card with a lower interest rate will give the borrower some time to think, but this is only a temporary state of affairs.

For many, the chance of wiping away this debt and starting again with a clean financial slate is very appealing. Filing for bankruptcy can do this, but should only be considered after some serious thought as to whether or not the situation can be saved, and should be only ever be a last resort.

In addition, various companies have sprung up in recent months offering to handle your bankruptcy case for you, without fully explaining the consequences of personal bankruptcy. These should be treated with care.

If you decide bankruptcy is the way forward, then you should hire an experienced bankruptcy lawyer. They are not cheap, but they will explain everything fully and in detail, and take you through your options. This is one area of expense that should not be scrimped on - your financial future depends on it.

Before declaring yourself bankrupt, you need to check that you are, in fact eligible. There are 3 possible reasons for ineligibility.

If in the last 180 days you have, of your own accord, dismissed your own bankruptcy case you are ineligible.

If you have previously declared yourself bankrupt and received the discharge within the last seven years you are ineligible.

If you have had a petition for bankruptcy discharged (you did not adhere to the bankruptcy code of practice) in the last 180 days you are ineligible. Assuming you do not fall into any one of those criteria, you may proceed.

Your lawyer will advise you of the best type of bankruptcy for you to file under. There are several "chapters" or types of bankruptcy, the most common being chapter 7 and chapter 13.

Chapter 7 results in you losing virtually all of your personal property with the proceeds used to pay off as much debt as possible (after which any outstanding debt is no longer your responsibility), while chapter 13 is essentially a repayment plan, where you keep most of your possessions and repay all your debt over a 3 to 5 year period.


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