The current crises has more and more people considering filling for bankruptcy.

To some, filling for bankruptcy can be seen as way of solving financial problems like putting an end to debt collectors, bills, and nagging creditors. However, a bankruptcy filling brings its own problems and will affect your ability to get credit for many years. Bankruptcy can also be hard on one´s self-esteem.

Going bankrupt has nothing to do with being “rich” or “poor”, in fact, most people that file for bankruptcy can be considered “rich”.

How to file for bankruptcy

A bankruptcy filling should be your last option, so you should consider all possible solutions. A bankruptcy filling is going to remain on your credit report for up to ten years and will make it hard to get any kind of a loan during that period.

You will also be required to undergo credit counseling before being able to go bankrupt.

There are two different type of bankruptcy fillings. A Chapter 7 bankruptcy and a Chapter 13. Most individuals are required to file a Chapter 13 bankruptcy which entails some form of repayment plan. On the other hand, a Chapter 7 Bankruptcy requires that you liquidate your assets to repay the debt. Under this type of a liquidation no additional payments will be required.

Since filling for bankruptcy is very complicated, it is recommended that you consult an attorney. A bankruptcy filling will also set up back over $1200 and as much as $2200.

One of the benefits of bankrupcy is that an “automatic stay” takes effect. During this period your creditors or collection agencies can not contact you concerning your debt. Any creditor that breaks this “automatic stay” can be held responsible. You should inform your lawyer if any creditor contacts you during this period.

Your next step will be to meet with your creditors. At this point you should list all of your assets and your debts. Most your debt will be eligible to be included in your bankruptcy filling. Some of the exceptions are tax bills and student loans.

Under any circumstance should you try to increase your debt prior to filling for bankruptcy. If creditors can show that you intentionally incurred debt that you knew you would not pay, this amount can be excluded from your bankruptcy filing.

In a Chapter 7 bankruptcy you will receive a notice of discharge of your debts about two months later assuming none of the creditors challenge a particular debt. In case of a Chapter 13 bankruptcy filling the notice is only sent out at the end of the repayment period.

Steps to take after a bankruptcy filling

A bankruptcy filling will stay on your credit report for up to ten years, but you should start rebuilding you credit as soon as possible. This will pay-off in the long run.

You should pay all your bills in a timely manner. Some companies report these timely payments to the credit agencies. Also, don´t apply for too much credit at a time, and don´t use a large portion of any available credit you have.

The best way to start rebuilding your credit is by paying off any new loans on time. One of the best ways to start rebuilding your credit is by applying for secured credit cards. Secured credit cards require a deposit but are reported to the credit agencies just like regular credit cards. You should have a secured credit and should make timely payments every month. You do not need to carry a monthly balance or incure interest charges in order to rebuild your credit.

Finally, order credit reports from all major credit reporting agencies and make sure that any debt discharged as part of your bankruptcy filling is not showing up as overdue. Sometimes this can happen.

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