Insurance and Credit

It’s unfortunate how many people become overwhelmed by their monthly credit card bills and can’t seem to find a way out. Bankruptcy, although not to be taken lightly, has been a serious option in the past for many people. With the recent changes in the bankruptcy code, however, many wrongly believe that bankruptcy is no longer available as a solution to their debt problems.

There certainly have been some changes, but they were not necessarily as severe as many people think.

The new bankruptcy law is known as the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Yes, I know that’s a mouthful. You don’t have to know every detail of the bankruptcy code – you can leave that up to your lawyer. What you need to know is that this law makes declaring bankruptcy a more involved process, but most people who would have been eligible before will continue to be eligible.

One of the main components of the new code is known as the means test. This test was designed to help determine whether you really need bankruptcy based on your income and expenses. If you have a relatively low income when compared to others in your state, then the bankruptcy means test will not be necessary in your case.

However, if your income is higher than the median for your state, then you’ll have to go through a more intense process. You’ll have to provide documentation of your income and expenses to show that you really can’t afford to pay your bills. Otherwise, you might have to settle for chapter 13 bankruptcy in which you agree to a repayment plan instead of simply wiping out your debts.

In addition, Congress mandated certain measures such as financial management classes to help ensure that you did not end up in another financial crisis in the future. Neither you nor your creditors would like to see that happen.

You also must make your federal income tax returns available to your creditors if they desire it. Again, the goal is to prove that you’re unable to pay your bills with your current income while being able to put food on table.

One more thing you should consider about the new bankruptcy law is the increase in lawyer fees. Because the law is more complex, it will probably require more work from your attorney. This could result in higher costs, which is why you should prepare as much as possible before entering a bankruptcy law office. The more you know beforehand, the less work your lawyer has to do.

Overcoming shame is the hardest aspect of filing bankruptcy. Knowing the others are judging you, deeming you to be a failure. The harsh ideas that you took advantage of the system and the easy way out instead of paying your debts like everyone else.

The ability to file bankruptcy does not give you a free ticket to purchase what you want with complete disregard and have no intention on paying for it. For a large number of Americans, they are not using bankruptcy as a free ticket. However, there is a small percentage of Americans who intentionally run up thousands debt, only to repeatedly file bankruptcy and not learning how to change their poor spending habits.

For the majority of Americans who file bankruptcy, many file for personal bankruptcy due to job loss, many have excessive medical bills that will saddle them for a lifetime, many are single moms who don’t receive child support or are have been given the debts of their former partner. For the majority of Americans, it may be a combination of the above.

I know because I was very judgmental of those that filed personal bankruptcy. I assumed they were blowing money on luxuries that they couldn’t afford. I thought they were spendthrifts who just wasted their money. I judged them for not living within their means.

As I filed for personal bankruptcy, I had to release the ideas I had about others who had also filed, as I knew critical thoughts on my budget and spending would be thought about me. Knowing my name would be published in the public record in the newspaper, the whispers of gossip that were silenced as I walked in the room, knowing I failed with some of my financial obligations, was something I would have to face.

Even though others out there may not understand your decision, you have to overcome the critical judgments, and make the best decision there is for you and your family. Is it irresponsible to file personal bankruptcy and discharge your financial obligations and outstanding debts? Is it unethical to not pay your bills? Will you ever be able to overcome your failures?

Once I looked deep within myself, I decided that I was going to face failure and take responsibility for my financial missteps. For the bill collectors to call from sun up to sun down, should that be ignored? to night. To tear up the collection notices that are in the mail everyday is irresponsible. You are a failure of you kid yourself about the debt you have created. I was a failure to my family for not properly preparing for retirement, or college or a savings account. Not being able to provide the things my children needed, like school clothes, made me a failure.

Once you thoroughly evaluate your financial situation and take steps in fixing your actions, you begin to take responsibility for the mistakes you have made. It is irresponsible to pretend your financial problems don’t exist. Take the responsibility to fix your family’s future.

One of the more interesting questions I’ve heard regarding personal bankruptcy is whether you can declare bankruptcy twice. What’s wrong with this question? Well, I hope the point is obvious to you, because if it isn’t then you should pay close attention to the next few paragraphs.

First of all, bankruptcy provides an individual (or a family) with a fresh start financially. It is a significant step which affects your credit and reputation for several years, but it can also be taken as a second chance to rebuild your finances and a better future.

Most people end up declaring personal bankruptcy because they have not learned how to spend their money wisely. Managing your money as efficiently as possible is critical to financial success in the long term. Too many of us have learned to live on credit and buy more than we can afford, until one day we realize that we have dug a hole too deep to get out of without professional help.

Of course, poor financial planning isn’t the only cause for ending up in bankruptcy court. Sometimes you’re faced with a medical emergency that you cannot afford, and you have inadequate insurance or no insurance at all. These problems may hit you while you’re still trying to improve your finances so you can afford adequate coverage and an emergency savings fund.

The good news is that filing for bankruptcy can give you a break from all the bill collectors and let you catch your breath, so to speak. However, you have to take this second chance seriously and do everything in your power to change your spending habits. As we have already stated, most bankruptcies are the result of no discipline in your spending. You must take this opportunity to make the necessary changes and avoid a repeat of your financial crisis.

So in case you’re wondering, it is possible to declare bankruptcy twice. However, there are limitations as you would expect. If you file successfully for chapter seven, in which all of your debt is eliminated, you’ll have to wait for at least eight years to file again.

You may not have to wait the full eight years if your original bankruptcy case was not successful or if you filed for chapter 13 bankruptcy and have paid most of your debts off. Again, trying to file bankruptcy a second time should not be your goal. Also, there’s no guarantee that your case will be successful a second time around anyway.

Of course, there’s no guarantee that your case will be successful the second time around anyway. This is another reason why you must discipline your spending and do whatever it takes to improve your financial situation after you’re first bankruptcy. In other words, try to make your first bankruptcy your only bankruptcy.