Most people would prefer to file bankruptcy online, but this option is not available. However, individuals can conduct online research to learn about the new bankruptcy laws, download bankruptcy forms and documents, and locate a lawyer to help them through the process.
There are several reasons debtors cannot file bankruptcy online. The primary reason is bankruptcy petitions must be submitted through the courts and debtors must undergo a series of events before the petition is approved. Additionally, new bankruptcy laws require debtors to abide by specific protocol which cannot be managed through online sources.
New bankruptcy laws refer to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. BAPCPA forever changed the way bankruptcy is handled. The new laws came about due to debtors who engaged in reckless spending habits and later filed bankruptcy to discharge outstanding debts.
Prior to BAPCPA, debtors would seek protection through Chapter 7 which allowed them to liquidate assets and discharge remaining balances. After BAPCPA, the majority of petitioners are required to obtain debt relief through Chapter 13.
To determine the amount of debt to be repaid, debtors are required to undergo the ‘means’ test which compares their income to state income levels. Petitioners who earn more than median levels must enter into a Chapter 13 payment plan. Petitioners earning less may be allowed to obtain protection under Chapter 7.
Filing bankruptcy petitions requires the services of a bankruptcy attorney. BAPCPA requires lawyers to submit certified statements that they have reviewed petitioners’ financial statements and the information provided is true and accurate. The additional time for verification results in higher legal fees.
The new bankruptcy laws also require all debtors to obtain credit counseling through a U.S. Trustee approved agency. Debtors must present a credit counseling certificate of completion before the court will authorize their petition.
Once Chapter 13 payments are established, debtors remit installment payments to their assigned Trustee until debts are repaid. Chapter 13 payment plans often last for 2 or more years and can place financial strain on petitioners.
Debtors often find it challenging to comply with the terms of bankruptcy payment plans. Approximately 80-percent of debtors fail out of bankruptcy during the first year because of financial restrictions.
There are two ways debtors can fail out of bankruptcy. The first is by defaulting on Chapter 13 payments. When this occurs, creditors can petition the court seeking dismissal. The second is when creditors force debtors into involuntary bankruptcy. Either way, debtors lose protection from the court and held accountable for outstanding debts.
Personal bankruptcy is reflected on credit reports for up to ten years and will prohibit debtors from qualifying for credit of any kind for several years. It normally takes at least 2 years before debtors can qualify for bank loans or credit cards. Debtors are prohibited from incurring new debt while their bankruptcy payment plan is in place.
Debtors must carefully weigh the pros and cons of filing bankruptcy. It is best to research bankruptcy alternatives such as debt consolidation, home equity loans, or debt settlement. While debtors cannot file bankruptcy online they can utilize the Internet for most aspects of filing a petition.
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