Generally speaking, individuals think more than twice before filing a bankruptcy application. One of the reasons for this hesitation is the stigma that they and their family members would carry once they are declared bankrupt. Apart from this, after declaration of bankruptcy, their credit standing takes a nose dive and they find it hard to raise loans. So some financial advisers say that an individual will have to think carefully before filing a bankruptcy application. The financial advisers suggest that before filing the application, the individual should explore all possible avenues to liquidate the loan. The application for bankruptcy should be filed only as a last resort.

From the legal point of view:

Normally individuals are allowed to file bankruptcy application under Chapter 13. In the year 2005, the bankruptcy law has been amended and the procedure for considering the application has been made more stringent. This has been done to ensure that only those who are really in a financial mess would derive benefit from the bankruptcy law. The attorney who pleads for the individual has to exercise more caution in filing the application. Applications can be filed under Chapter 7 only if the income of the individual is more than the median of the State. If it is not so, then the individual will have to file it under Chapter 13.

Chapter 13:

When applications are filed under Chapter 13, the court will normally allow some time; say about 3 to 5 years to clear the debt. This is only to ensure that the individual would make all efforts to liquidate his assets or find some appropriate ways to raise necessary funds to clear the debt. During this period, the creditors are not allowed to contact the debtor unnecessarily. So the debtor has time to think and act.

Uses of the amended bankruptcy Act:

The bankruptcy Act as amended in 2005 aims to reduce frivolous applicants approaching the court. This is aimed only to help the genuine applicants who are really in distressed financial condition. The Attorney will have to suitably advice his client about the pros and cons of filing the application under Chapter 13 of the Amended Bankruptcy Act.




Debbie Joneta also writes about Bankruptcy and Credit issues including File Personal Bankruptcy and Filing Bankruptcy Online

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