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| Articles: (Updated Frquently) |
| The Facts About Personal Bankruptcy |
| By: Jay B Stockman |
The thought of personal bankruptcy is very frightening, however over 5.4 per 1,000 people have filed for bankruptcy last year, and this rate has been growing at an average of nearly 7 percent. Researchers have determined that the primary cause of personal bankruptcy is uncontrollable levels of consumer debt oftentimes coupled with an unexpected event, such as a major medical expense not covered by insurance, the loss of a job, divorce or death of a spouse. According to economists’ surveys, the classic bankruptcy filer is a blue collar, high school graduate who is the head of a household in the lower middle-income class with heavy use of credit. In order to protect both debtor, and creditor,
laws were enacted to provide equal, and fair measures to satisfy the objectives of all parties. The primary purpose of the laws of bankruptcy are: (1) to give an honest debtor a fresh start in life by relieving the debtor of most debts, and (2) to repay creditors in an orderly manner to the extent that the debtor has property available for payment.
There are two types of structured plans for filing for personal bankruptcy, Chapter 7 or Chapter 13. Over two-thirds of personal filers choose Chapter 7 bankruptcy. Basically Chapter 7 requires the debtor to liquidate all non-exempt assets, and have them distributed among creditors. Some examples of exempt assets include equity in a primary residence, and a retirement program. On the other hand, Chapter 13 does not require liquidation, rather a debtor agrees to a specific payment plan, whereby a portion of any unsecured debts is paid, and the balance is forgiven. It must be stressed, that under both plans, certain debts are ineligible for bankruptcy protection. These debts include government student loans, child support, alimony, and income tax debt. These must be paid back in full.
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Some analysts are concerned that this unprecedented level of debt might pose a risk to the financial health of American households.
In an attempt to reverse the increasing trend in personal bankruptcy, the federal government has recently implemented sweeping bankruptcy reform legislation. On March 10, 2005, the Senate passed S. 256, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.
On April 20th, President Bush signed into law the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (Bankruptcy Act of 2005). This act makes filing for bankruptcy more difficult through income-means testing, tougher guidelines for the homestead exemption, increased lawyer liability and required credit counseling.
About the Author
Jay B Stockman is a contributing editor for Online Bankruptcy Resources Visit http://online-bankruptcy-lawyer.com/ for more information.
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| Declaring Personal Bankruptcy |
| By: Alan Jason Smith |
If you’re drowning in debt and creditors have your phone ringing off the hook, personal bankruptcy might seem the only way out. Indeed, for people whose debts dwarf their ability to pay, declaring bankruptcy can be a fast way to gain a fresh financial start.
There are two types of bankruptcy petitions you can file: Chapter 7 and Chapter 13. Each of these have a different purpose and different set of circumstances attached.
Chapter 7 bankruptcy involves the seizing and liquidation of your assets. This includes real estate, stocks, bonds and valuable property. Once liquidated, the proceeds are used to pay off the various creditors you owe. Property exempt from Chapter 7 bankruptcy includes vehicles worth less than $1500, most household furnishings and goods and clothing. You are also entitled to retain $18,450 worth of equity in your home.
The goal here is to leave you with enough to make a fresh start after bankruptcy is declared so you don’t end up completely destitute. At this point, you are discharged of all remaining debts. Once bankruptcy is filed, your creditors must cease from any lawsuits, wage garnishing, letters or telephone calls compelling you to pay.
There are some debts that cannot be discharged by filing for bankruptcy. These include current or back-owed child support and alimony payments, most student loans, recent tax bills or debts to creditors toward whom you’ve exhibited dishonesty in the past.
Within a relatively short time period after filing for Chapter 7 bankruptcy, your debts will be discharged and you will have a clean financial slate. However, filing for Chapter 7 does not always guarantee freedom from your debts. If a judge deems you fit to pay, you may be denied Chapter 7 bankruptcy and forced to file for Chapter 13.
Chapter 13 bankruptcy’s goal is not to discharge you of your debts but to reorganize them and develop a court-ordered repayment schedule. A person who files for Chapter 13 bankruptcy typically has three to five years to pay off all debts to creditors. Chapter 13 bankruptcy is preferable for people who want to retain ownership of their property and assets, and/or have a reliable and prolonged source of income.
Regardless of which type of bankruptcy you file, you must consider your co-debtors carefully before making the decision to file for bankruptcy. If there are people who have co-signed for loans but who are not declaring bankruptcy jointly with you, if your debts are discharged, your creditors will go after your co-debtors to collect your portion of the debt.
You may be afraid that declaring bankruptcy will permanently ruin your credit rating, but this is not true. If you are already in a position to considering bankruptcy, chances are that you credit rating is already so poor that declaring bankruptcy could not make it any worse. A fresh financial start and the opportunity to rebuild credit from the ground up may even improve your credit rating in the long term.
Whatever decision you make regarding personal bankruptcy, it is never a bad idea to consult with a lawyer, financial advisor or credit counselor before proceeding. These professionals can advise you on the most prudent course of action to protect the integrity of your financial future.
About the Author: Alan Jason Smith is the owner of http://www.blackbankruptcy.com which is a great place to find bankruptcy links, resources and articles. For more information go to: http://www.blackbankruptcy.com
Source: www.isnare.com |
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| Keywords: bankruptcy credit rating, bankruptcy might seem, hook personal bankruptcy, declaring bankruptcy, bankruptcy, personal bankruptcy, bankruptcy’s, that declaring bankruptcy, http//wwwblackbankruptcycom |
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