While it would be convenient to file bankruptcy online, this preference is not yet available. However, many other facets of filing bankruptcy can be conducted online such as locating lawyers, downloading forms, and researching bankruptcy alternatives.
Although petitioners cannot file bankruptcy online, the Internet provides multiple tools which can expedite the process. Debtors can download bankruptcy forms to help organize required information and financial records and use calculators to determine which bankruptcy chapter they may qualify for.
Several websites offer do-it-yourself bankruptcy kits, but caution should be exercised before attempting to file bankruptcy on your own. New bankruptcy laws took effect in 2005 that forever changed the bankruptcy process. Few people can comply with the stringent criteria without legal assistance.
The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) require petitioners to follow specific protocol. Personal bankruptcy includes Chapter 7, Chapter 11, and Chapter 13. Chapters 7 and 13 are the most common. Chapter 7 is often referred to as ‘fresh start’ bankruptcy because debts are discharged. Prior to BAPCPA, Chapter 7 was the preferred bankruptcy choice.
Today, the majority of petitioners are required to establish Chapter 13 payment plans which often extend for two or more years. Debtors are also required to obtain credit counseling and present a certificate of completion through the court before bankruptcy approval is granted. Credit counseling must be obtained through U.S. Trustee approved agencies; many of which offer low-cost services and base fees on debtors’ income.
BAPCPA uses a financial tool called the ‘means’ test to determine which bankruptcy chapter is required. The means test compares debtors’ income to state median income levels. Those earning more than median levels are usually required to submit a chapter 13 bankruptcy petition.
Many people fail to realize the financial burden of chapter 13 payments. Debtors are required to submit installments to the bankruptcy Trustee. These payments are in addition to normal living expenses. Although debts have been consolidated, bankruptcy payment plans are often in place for two or more years.
If debtors encounter financial problems which prohibit them from adhering to their plan, the court can dismiss their petition. When debtors fail out of bankruptcy, creditors can proceed with debt collection action.
Those who are successful at adhering to their plan will still experience financial consequences. Personal bankruptcy wreaks havoc on credit scores which can take years to overcome. During the payment plan, debtors are prohibited from incurring new debt without court approval.
Once chapter 13 payments are satisfied, debtors often find it nearly impossible to obtain credit of any kind. Those who do qualify for financing are usually subjected to high interest rates and limited credit lines.
Bad credit scores can also affect other facets of life such as paying higher insurance premiums or being required to pay larger security deposits for rental homes or utility services. Bankruptcy can also negatively affect employment opportunities as many employers are now conducting credit and background checks on prospective hires.
Carefully research bankruptcy information online and consult with a lawyer to determine if bankruptcy is the best financial decision. Take time to weigh the pros and cons, as this decision will impact your life for 7 to 10 years.
Sources:
United States Courts: Bankruptcy Basics
U.S. Trustee Program: Bankruptcy Abuse Prevention and Consumer Protection Act
