Many in New York have experienced hardships from the weak economy. Some of them are still apparent and are forcing individuals to file for personal bankruptcy. Those who do file should know that only unsecured debts can be forgiven. They should also know that any filing will be subjected to the regulations listed in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Some of those regulations have caused the cost of bankruptcy to increase.

Bankruptcy is not just for individuals who have been spending irresponsibly. Though it is often seen as such, the effects of the economic downturn have caused many fiscally responsible individuals to file unexpectedly. The sudden loss of a job, medical expenses or a divorce can usually account for such a situation.

Chapter 7 filers can have their unsecured debt forgiven after a liquidation process that allows trustees to sell any eligible assets in order to repay creditors. But before that occurs, a debtor must complete credit counseling. Applicants must also produce 60 days worth of pay stubs and attend a financial management course. A means test is required to make sure that applicants cannot afford to repay some of their debts without liquidation.

Because of these, filing for bankruptcy can become rather expensive. The filing fee was recently updated, bringing it to around $300. Credit counseling can cost between $25 and $50. But at the end of a successful bankruptcy filing, unsecured debts are removed, so it may well be worth the costs for that fresh financial start.

Source: Charleston City Paper, "How to File for Bankruptcy," T. Ballard Lesemann, Dec. 31, 2011