Enter Bankruptcy Protection

Bankruptcy protection is a common legal process that serves as an alternative to traditional bankruptcy measures. In the United States, a business or individual can file for bankruptcy protection when it becomes impossible to make payments to creditors.

Sometimes an individual or business enters bankruptcy protection to avoid losing a large asset, such as a home. Through a protection program, the debts are restructured via Chapter 13 bankruptcy. When an individual is in debt and unable to repay, even after a restructuring of the debt, he or she will most likely need to file for Chapter 7 protection.

Before entering bankruptcy protection, compile a list of assets and debts. As a general rule of thumb, most student loans, court fines, alimony payments, and taxes cannot be restructured. Regardless, make a complete and accurate list.

Next, it is always a good idea to hire an attorney when seeking bankruptcy protection. This is especially true when the future of a house hangs in the balance. When visiting an attorney for the first time, he or she will need the list of assets and debts, personal banking account statements, and pay stubs or tax forms as proof of income. The same documents are required if you choose to file for protection without the assistance of a lawyer.

In 2005, the federal government passed legislation that requires everyone who files for bankruptcy to attend a credit counseling class. These classes are hosted by registered agencies around the nation and can provide much needed insight when opting for Chapter 13 protection.

You may also be able to lower your monthly bills or cost of credit by consolidating your debt through a second mortgage or a home equity loan.

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