How To Claim Bankruptcy – What You Should Think About

Bankruptcy is a situation where a person or legal entity can no longer repay or service their debt. With the recent economic downturn many people have been caught out by finding themselves in a situation where not only can they not afford to repay their debt, they cannot afford to pay the interest. This has meant that many are now looking to find out how to claim bankruptcy.

However, a bankruptcy petition is sometimes not a matter of personal choice. A creditor can file a Bankruptcy Order against a debtor, and bankruptcy proceedings will continue even if the individual against whom it has been served ignores or disputes it.

Claiming bankruptcy should only be entered into as a last resort, and all avenues should be explored before taking this final step.

So what are the pros and cons of Bankruptcy?

The most popular chapter to file bankruptcy under is chapter 7, where an individual has all debt taken away. Not all debt can be written off however, and if the main contributor to the bankruptcy is debt that has to be repaid, a chapter 13 bankruptcy is the more appropriate chapter.

There are two downsides to this however.

The main disadvantage is that the majority of your possessions are liquidated to pay your creditors.

The other downside is that those who have had financial dealings with you in the past, if, after selling all your possessions are still out of pocket, are unlikely to want to have any financial dealings with you in future.

All the above relates to chapter 7 bankruptcy laws.

New laws introduced in 2005 make all bankruptcy applicants undergo a financial means test.

In addition, your income is examined and if, over the 6 months prior to filing, your income is more than the median in your state for a family of your size (and you fail the means test), you cannot claim chapter 7 and are pushed into chapter 13.

No personal property is liquidated under chapter 13, but all debt is repaid under a 3-5 year repayment plan.

The means test used to define an individuals allowances and income is complex and quite harsh. The means test can also make your income look better than it is, resulting in a repayment plan that leaves an individual with very little disposable income.

After bankruptcy, rebuilding one’s credit score is vital. Your credit record will retain details of a chapter 7 bankruptcy for a period of 10 years and a chapter 13 for 7 years.

For more free information on how to claim bankruptcy and the various chapters and how they work, go to www.howtoclaimbankruptcy.net

Restoring Credit Rating Post Bankruptcy

The fact is, after bankruptcy life changes, and if you want to restore your financial position, there are certain strategies one can use to improve one’s credit rating, but these are greatly helped by including them as part of an overall strategy prior to filing chapter 7 bankruptcy.

Tip 1. Your Accounts.

It’s important that you understand how your credit score is compiled. It is not just a single agency that gives the rating, but data that the agency receives about your credit position from your creditors. This is analyzed and your score worked out.

If you can persuade your creditors, and it doesn’t have to be all of them, to stop reporting your credit score with them to the credit agencies, which is perfectly legal, this will have a beneficial effect on your credit rating.

Tip 2. Credit Cards.

You may be surprised to know that credit cards, used properly and paying the balance off each month can help improve your credit rating, because the powers that be see you acting responsibly. So, even if you have vowed never to use one again, it is in fact a good idea to try and get a credit card after bankruptcy.

Tip 3. Secured Credit Cards.

A secured credit card works just like a normal credit card, but you credit limit is part of the price of the card. Rather than have a card that comes with an agreed limit, you pay your credit as a cash deposit with the card issuer. You may then go out and spend on the card up to the amount you have deposited.

Cash spending is not seen by the credit agencies. Credit card spending is, and if you pay the balance every month this will be seen as responsible spending, and your credit rating will improve. In addition, there is no danger of getting into credit card debt again as the maximum limit is covered by your deposit.

A word of caution, some less reputable card issuers are not registered with the credit agencies, making any card they give you useless in your quest to increase your credit score. Always ensure that any issuer you go with is registered ar the credit bureaux.

Tip 4. Get Included on a Friend’s Credit Card.

If you can persuade a relative or friend (with a good credit record) to add your name to their card, you will benefit from their history and this will improve your rating. The other person’s rating is not affected by your bankruptcy and you do not even have to use the card, it can be totally passive.

Be careful however, because if the other person experiences financial difficulty, then this will have a detrimental effect on your rating, but as long as that does not happen, you will see an improvement in your credit rating.

For a good number folk however, harsh economic events have conspired to make managing their debts impossible, and has left them wondering how to claim bankruptcy. If you are in that situation and need more free advice, visit www.howtoclaimbankruptcy.net.