If you are head-over-heels in debt and thinking of filing for bankruptcy to wipe the slate clean and start all over, think hard before starting this process. It impacts your whole family, including your children.

Seek out all other viable arrangements before your file for bankruptcy, including contacting each of your creditors, explaining your predicament and attempting to work out some sort of payment plan.

Before moving to bankruptcy, Ask yourself a few questions:

• Have I talked this over with my family? If you have a family, you must understand that filing for bankruptcy affects everyone in your home.
  
  
• Am I emotionally ready to file for bankruptcy? To many people filing for bankruptcy represents failure.
  
  
• Am I ready to change my spending habits? You must be willing to change your heavy spending habits 180 degrees.
  
  
• Am I ready to deal with the fact that this bankruptcy will be on and remain on my credit report for up to ten years?
  
  
• Am I ready to reshape my credit report by rebuilding and paying off old accounts as arranged by my creditors? If you and your creditors come to an agreement on payment-plan terms, will you keep this contract with them?
  
  
• Can I live without using my credit cards? If I use them, can I pay off the amount due every month or in a timely fashion? Understanding that the way to rebuilding a good credit rating, among other things, is on-time payments, will you be able to do this?
  

If you have a problem answering these questions, after filing for bankruptcy you may find yourself with more financial problems.

In October 2005 there will be a new and tougher bankruptcy law. This new law is called Bankruptcy Law Reform or the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (S.256). Those who file for bankruptcy, but can still afford to pay some monies to lower their debts, must do so according to their state median income. As I understand it, if your salary is at or above your state's median income you will be able to file for Chapter 13; however, you will be required to pay a certain amount per month to lower your total debt. If you have little or no income and very few or insufficient assets, a Judge may allow you to file for Chapter 7 bankruptcy to wipe out your debts. This Bill was passed by the Senate in March 2005, passed in Congress in April 2005; the President signed the Bill April 2005. It appears that these changes were brought about to help control the filing of record-high frivolous bankruptcies. If the new bankruptcy law affects you see your attorney for guidance. This law applies to United States only. For more information see link at your right.

You may also want to read my interview with Mary Claire Allvine, certified financial planner. Ms. Allvine wis the co-author of The Family CFO: The Couple's Business Plan For Love and Money.

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