Bankruptcy vs debt consolidation, which one is right for your current debt problems?

Its not a great moral sin to go into bankruptcy. Just look at the seminal American department store chain Kmart, they went bankrupt in 2002 and rebounded a mere 15 months later. When you (or Kmart) declare bankruptcy, this gives you a breather to try and get your life back together without the people you owe money to breathing down your neck.

In the old days, if you couldn’t pay your bills, you were thrown into debtors prison. Believe it or not, going through bankruptcy Proof of Claim court is better than going to prison.

The Last Resort

Declaring bankruptcy will stay on your credit record for ten years, so be sure this reality is something you can live with. Bankruptcy Proof of Claim courts rules and regulations differ from state to state, but the only state you need to worry about is the state you live in (or your primary state of residence.) You can do deal with the Proof of Claim court on your own or you can hire a lawyer. If you are not familiar with bankruptcy Proof of Claim court, then it will cheaper in the long run to hire a lawyer. Ultimately, though, you need to decide whether you are claiming a Chapter 7 bankruptcy (liquidation of everything you own) or a Chapter 13 bankruptcy (a repayment plan).

Filing a Proof of Claim

A Proof of Claim needs to be filed within 90 days of your meetings with your main creditors (banks or credit card companies, for example). You are called the debtor. Whoever you owe money to is called a creditor. They have to give you about 100 days before they have a meeting with you (called a 341 meeting) where you officially declare bankruptcy. As a debtor, you are not responsible for filing the Proof of Claim forms. Instead, it is the creditors’ responsibility to file the claim in court. If they don’t do this on time, they will lose any right to the financial that you owe.

Other Tips

When you declare bankruptcy, for goodness sake, do not use any credit cards. This will look bad to any states bankruptcy Proof of Claim court. If you are worried about your employer or landlord being notified of your bankruptcy, don’t (unless you owe them money). Federal law requires that your employer and landlord need not be informed of your bankruptcy. However, bankruptcy claims are considered public records. But it would be up to your employer or landlord to check the public records out, but honestly, how often does the average America decide to causally go through public records concerning bankruptcy?

About the Author:

Paying for their own education is part of helping students use debt responsibly. Learn more about how to keep your kids from getting sucked into the debt trap at the Debtopedia

William Blake | Bankruptcy Basics |

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