In the past, the perception of personal bankruptcy has been only for the poor. Since the economic collapse of 2008, bankruptcy has taken on a new face. Now in the US, people with six-figure incomes are being forced to file for bankruptcy. More wealthy people are going bankrupt in this new economy than in any previous recession in the last 80 years. The group of people most affected by this recession is the middle class. Recently, the survey showed that the majority of people who file for bankruptcy earn more than $60,000 a year. With the housing market continuing to spiral to the point where no one knows where the bottom is. This has deeply affected the business world as companies are afraid to hire people because they don’t know what the future holds for them. One of the main groups of people who file for bankruptcy are mortgage brokers, real estate agents, and contractors. This business sector was the first to be affected by the recession and will probably be the last to recover. The indirect consequences of a falling housing market filter through the entire economy. When people don’t buy houses, they don’t buy refrigerators and household items. As the tightening continues, it affects even the local coffee shop, as people simply don’t have enough money to eat out.

When thinking about filing for personal bankruptcy, most people don’t understand that one size doesn’t fit all. First of all, filing for bankruptcy will not eliminate certain types of obligations like child support, alimony and, in most cases, student loans. It is possible to discharge a student loan in bankruptcy, but the debtor has to prove to the bankruptcy court that repaying the debt would cause undue hardship. This is usually for people who are permanently disabled and will never be able to pay off those debts.

There are many positives to filing for personal bankruptcy and there are different chapters that can be used to discharge debt. There are two basic chapters of personal bankruptcy. First, there is Chapter 7, which is best used for people with large amounts of unsecured debt, such as credit cards and medical bills. Most people think of Chapter 7 bankruptcy when they think of bankruptcy. In a Chapter 7, a debtor’s payment plan is not required. The debtor is required to pass a means test to qualify to file for Chapter 7 bankruptcy. When the bankruptcy code changed in 2005, they placed restrictions on the amount of household income a person could have and still qualify to file for Chapter 7 .

On the other side of the fence is Chapter 13 bankruptcy. A Chapter 13 is best for a person who is employed and wants to protect their property. Rarely does a debtor lose any property in a Chapter 13 bankruptcy filing. The downside of a Chapter 13 is that they must come up with a workable payment plan that lasts 3-5 years. The court understands that many things can happen during this time period, allowing the debtor to make changes to the plan during the bankruptcy. A Chapter 13 should not be attempted without the help of a bankruptcy attorney.

Filing for personal bankruptcy has taken on a new complexity since the code changed in 2005. Although not required, it’s best to always use a bankruptcy attorney to file. Using the experience of a bankruptcy attorney will ensure that the debtor obtains the maximum benefits of the bankruptcy exemption laws, protecting the debtor’s property as much as possible.