Filing bankruptcy takes place when the concerned person has no cash or assets to clear off the money which he got from his creditors. Bankruptcy has to be filed in the state or federal court.

Filing for bankruptcy should not be an impulsive decision. It provides immediate relief from your financial predicament. However, this has adverse effects for the next seven to ten years. Majority of people file for bankruptcy just to take care of the present situation. Short term gain will lead to long term loss.

It is recommended to hire a lawyer to represent you throughout the bankruptcy proceedings. A good bankruptcy lawyer is familiar with the laws and traps will steer clear of them. Remember that filing for bankruptcy is a drastic step and always used as a last resort. It used to be a social stigma but now it does not seem to carry that sort of negative stamp on your person. Nevertheless, it should be taken as a sign that severe financial and personal mistakes have been made and time and energy have not been focused in the right areas or have been wasted never to be seen again.

On filing for bankruptcy, collection letters and other forms of communication to the debtor immediately stops. This is because the debtor protection is in order. The creditors do not have the right to sue, demand payment from the debtor or communicate with the debtor. So the debtor is free of harassment.

Many people handle the bankruptcy process on their own. Some people go in for hiring a qualified and experience bankruptcy lawyer. The lawyer is up to date with the current rules and regulations. He or she will be able to get the best deal possible. Incidentally, filling for Chapter 7 takes place only every eight years. Whereas, Chapter 13 reorganization permits you to file more often. However, you cannot have more than one case open simultaneously.

The debtor has to go through pre-filing credit counseling six months before filing for bankruptcy. Only a non-profit government approved counseling agencies has the right to conduct counseling. Personal finance management is covered and must meet the rules of Bankruptcy Code Compliance. The topics covered in the counseling course include

• (a) Analysis of your current budget and help to design a new budget
• (b) Reason for financial troubles
• (c) Available options to resolve debt
• (d) the reasons why people file for bankruptcy

The debtor should provide financial statement, schedule of current income and expenses, list of his assets and liabilities and the names of the creditors to whom money is due.

After filing for bankruptcy a trustee will over see his affairs. He will verify the accuracy of the information and whether all the required data is collected. Then you should inform all your creditors that you are filing for bankruptcy. So they will have to cease all actions against you.

You have to complete a personal financial management course prior to your debt being discharged. The course can only be conducted by an approved debtor education provider. You will be given a completion certificated which has to be filed with the court. Certain debts are not covered such as student loans, child support, alimony, and others.