Personal Bankruptcy: A Very Stressful Thought
January 26, 2010 advice, Finance, money
In the bulk of filings, just thinking of personal bankruptcy is sufficient to panic somebody so much that they be tempted to panic and be reluctant to carefully examine their financial problems. Unfortunately, statistics show that around five people out of every thousand have seen themselves filing for personal bankruptcy and still more disturbing, this number is rising. To compound this, studies from research corporations indicate that the main reason that individuals are filing for personal bankruptcy is due to excessive spending causing extreme debt. If these same individuals then get the financial weight of unplanned and unforeseen circumstances this can throw their monetary resources into total disarray.
There are numerous reasons why a consumer might elect to file for bankruptcy. Losing a job or going through divorce procedures are all too common as is the death of a spouse. Each of these have the possibility to spell disaster for your finances. The typical individual that chooses to file for bankruptcy is normally one who successfully graduated from high school, is a blue collar employee, and is also the head of the household, even though they are probably in the category of lower middle income. Simultaneously this person is also going to have extended their monetary resources too far and very likely relied heavily on credit in the past.
Laws currently exist that are designed to protect both the creditor and debtor and these laws exist to make sure that those consumers who are honest suffer as little as possible because of their financial mismanagement. The same laws also provide protection to the creditor and helps them to recoup any money owing to them.
If you are considering filing for personal bankruptcy there are two options available to you. The first is that you can opt to file for Chapter 7 bankruptcy. The second option is Chapter 13 bankruptcy and both differ quite substantially. Chapter 7 bankruptcy requires all of your assets (that are not exempted) to be liquidated and the proceeds of these assets will be spread amongst your creditors to fulfill the debt owing to them.
Chapter 13 bankruptcy is a somewhat softer option in that it does not expect any liquidation of your assets. It does however require you to reorganize your financial obligations in such a way that you are able to pay off the debts over a timeframe of between three and five years.
One of the things that many individuals do not consider, however, is that the option of which chapter to file is not their decision. This is a decision of the courts, who will give that decision after a close review of your particular financial data. It is because of this that a bankruptcy lawyer is highly recommended so your data can be exhibited in the correct format.
However, fear is present amongst numerous financial analysts who view personal bankruptcy as a serious menace to the wellness of the economic system and there is just reason for this. The number of individuals who file for personal bankruptcy is increasing causing a disturbing trend. In turn this has prompted some dramatic measures being enacted.
Only recently, in March 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was introduced and this forces individuals who file for personal bankruptcy to accomplish a number of tests on the status of their income and to stick to stricter regulations before they are allowed to declare this type of bankruptcy.
