With a lot of myth and lore surrounding the debt discharge granted by the bankruptcy court, the potential filer will be wise to research the law and be prepared to answer honestly whether the benefits outweigh the liabilities. Will life after bankruptcy really be all you imagine or will you be sorely disappointed?



For example, if you imagine yourself completely debt free, you may be unpleasantly surprised to realize that domestic payments, court settlements, and government student aid debts cannot be discharged.

Although you know that getting credit will be harder, you also know that there are some companies that specialize in granting credits to those who have just emerged from bankruptcy. Yet are you prepared to face the steep costs of such credit? Car loans and credit card interest rates will skyrocket and finding that credit that costs others between five and seven percent will run you between 25 and 29 percent, seriously lowers your buying power.

In addition to the foregoing, make sure that you keep a watchful eye on your credit report. Life after bankruptcy may mean freedom from a plethora of outstanding debts, but it also requires you to clean up your credit profile and some creditors are notoriously slow in marking their accounts as having been discharged. While it may not have a huge impact now, when the dust has settled and you are moving on with your life, failure to have these items corrected will further prevent you from gradually rebuilding your damaged credit rating.

Before October of 2005, a simple and straightforward Chapter 7 bankruptcy filing meant that the debtor would soon have the ability to start over without being hounded by collection agencies, outstanding bills, a mountain of credit card debt, and also no more medical bills that may have led to an undue burden on the individual's budget.

Yet all this changed after October of that year and after bankruptcy filing, debtors still were not home free but instead had to next subject themselves to intrusive, painful scrutiny that sought to discover the last hidden penny and red cent that could be used to pay toward a debt. In particular the means assessment was the watershed that caused many a family with young children to not get the much needed relief from a bankruptcy discharge, but instead forced some to linger in a hard to maintain Chapter 13 repayment plan.

By raising the value associated with a debtor's possessions ? never mind the fact that they could not be sold at that price on the open market ? and thus effectively lowering the homestead exemption, the rise in Chapter 13 cases has led to families lingering on the brink of fiscal disaster in an effort to meet the court enforced and supervised repayment plan.

Those uncertain whether their filings will be accepted under Chapter 7, even if they passed the means test, need to understand that the odds are good that their claims will receive a much higher degree of scrutiny than prior to the changes in the law. Thus, anyone considering bankruptcy to be a backdoor option ? if all else fails ? will need to rethink their approach to fiscal health.