Bankrupcy or Bankruptcy? Tips for Obtaining Financial Relief

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Bankrupcy is the most frequent misspelling for the word, bankruptcy. Regardless of how it is spelled, the end result equals financial relief. However, there are serious consequences to filing for legal protection through the U.S. Bankruptcy court.

Filing bankrupcy has become more challenging since the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. The first challenge can be locating a qualified attorney willing to take your case.

BAPCPA requires bankruptcy attorneys to file a statement that all information provided by their client is accurate and truthful. If it is later discovered the information was not factual, the attorney could be held liable through the courts.

One stipulation of the new bankruptcy laws requires debtors to repay a portion of their debts when possible. To determine the amount owed, debtors must undergo the 'means' test. This financial test compares the debtor's income against the median income in the state where they reside. If income is equal to or greater than median income, debtors' must file for Chapter 13.

Chapter 13 bankruptcy requires debtors to develop a creditor repayment plan. It is important to realize that debtors must continue paying regular payments in addition to chapter 13 payments. Repayment plans generally last between three and five years.

Debtors are unable to acquire new debt until reorganized debts are fully repaid. The exception to this rule is if debtors obtain court authorization. A bankruptcy judge might permit debtors to obtain a bank loan for college tuition, medical expenses, or extenuating circumstances that require financing to improve their quality of life.

Once a repayment plan is in place it cannot be altered. Payments are typically submitted to the bankruptcy trustee who in turn distributes monthly installments to creditors. In some instances, the court will establish direct deposit through the debtor's employer.

Obviously, this can be an embarrassing situation. Although employers are not legally allowed to terminate an employee for wage garnishment, it is best to stay on track with payments and avoid getting your employer involved.

If debtors are unable to maintain chapter 13 payments, creditors can petition the court and request dismissal of bankrupcy. If the judge approves the petition, debtors fail out of bankruptcy and lose all protection from the court. When this occurs, creditors can commence with collection actions, including obtaining judgments which remain on credit reports until paid in full.

Many reasons exist for people to seek financial relief through bankrupcy. As more people lose their jobs and medical insurance, bankruptcy filings are certain to rise. One major health issue can quickly bankrupt a person. Other reasons for filing bankrupcy include death of a spouse, divorce or to stop foreclosure.

The average cost of bankrupcy proceedings is estimated at $60,000. This includes legal fees, court costs, credit counseling and repayment of debts. Prior to filing bankruptcy attempt to work out a repayment plan with creditors. Some creditors will accept less than is owed, eliminate late fees and penalties, or reduce interest rates.

About the Author

If you are facing bankrupcy and need to sell your house to avoid foreclosure, real estate investor, Simon Volkov, might be able to offer a solution. Submit information regarding your property via the "we buy houses" form at

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