Bankruptcy - Your Fresh Start

Most American consumers are living too close to the edge. They are carrying too much credit card and mortgage debt and have too little in the way of savings. When the inevitable unexpected crisis comes along, they have little left to handle it and quickly slip into a critical financial state.

According to many bankruptcy experts, most people file for bankruptcy due to life-changing experiences, such as a job loss, divorce or serious illness. Uninsured medical expenses are supposedly the cause of about 20% of bankruptcy filings. But excessive debt also plays a very large role.

If you are drowning in debt with little realistic hope of paying off your bills, bankruptcy is your only real option. Although far from pleasant, bankruptcy can be easier to handle than the constant pressure put on a debtor by lenders and collection agencies. You can immediately stop all harassment and legal actions, wipe out a good deal of your debt and get a new start on life.

The anomalies of credit scoring also work against debtors struggling to pay off debt. Your score will be low because of excessive use of debt and missed payments. You're unlikely to get new credit and the interest rates on your credit cards might be raised to usurious levels. You are likely to have a better credit score and find it easier to get credit ? very expensive credit - after bankruptcy than before.

Also the stigma and embarrassment that used to accompany bankruptcy has largely disappeared. To many, it has become just another financial planning tool.

The Bankruptcy Procedure

Bankruptcy courts are part of the Federal court system. The bankruptcy law itself is a Federal law, although the states can have their own laws, which govern such things as exemptions. Federal bankruptcy judges apply both the Federal and state laws in the jurisdiction where they sit. Debtors sometimes have a choice of which law should apply.

Bankruptcy proceedings are commenced by filing certain required forms and paying a fee. Filling automatically stays all legal proceedings against you as well as all debt collection actions. Fees can be paid in installments, but must be completely paid before the dischare will be granted.

A trustee will be appointed. His job is to review your financial affairs, collect and sell assets, if necessary, and distribute the proceeds to your creditors. If you are setting up a repayment plan, he will be responsible for seeing it implemented. He will even pursue your debtors to collect money owed you that can be used to pay off your creditors.

The trustee's powers include the power to set aside preferential transfers made to creditors within 90 days before the filing of the bankruptcy petition, the power to undo security interests and other transfers of property that were not properly recorded under non-bankruptcy law at the time the petition was filed and the power to pursue claims such as fraudulent conveyance and bulk transfer remedies available under state law.

He also holds meetings which are attended by the debtor filing for bankruptcy and his creditors. This is probably the hardest part of the whole proceedure for most people.

The trustee will question the debtor about his financial affairs and go over his financial records to determine that all assets have been disclosed and that no fraud is being perpetrated on the court.

Attorneys for the creditors are also allowed to ask questions about your expenses and assets.

The trustee will also instruct you on other alternatives and lecture you on the proper use of credit.

He will then issue a report the bankruptcy judge will use in deciding whether to dicharge your debts and which debts are to be included.

A debtor is unlikely to ever meet the judge. In a Chapter 7 case, the debtor will not appear in court unless an objection is made. In a Chapter 13 case, the debtor might have to appear at a hearing approving his repayment plan.

Most of the work will be done in the trustee's office.

What Debt Can Be Discharged?

Not all debt can be discharged by a bankruptcy court.

A bankrupcy court cannot discharge debts arising from alimony, child maintenance and support obligations; certain taxes (including the last three years income taxes); debts for educational benefit overpayments or federal student loans; debts for willful and malicious injury; debts for death or personal injury caused by the driving while intoxicated from alcohol or other substances; and debts from criminal restitution orders.

To the extent that these types of debts are not fully paid by the sale of assets during during a Chapter Seven case or not fully repaid during a Chapter Thirteen case, the debtor is still responsible for them after the bankruptcy case has been concluded.

Other debts may or may not be discharged. Debts for money or property obtained by false pretenses, through fraud, embezzlement or misuse of funds while acting as a fiduciary; debts for willful and malicious injury to another entity or to the property of another entity; and debts arising from a property settlement agreement incurred in connection wth a divorce or separation are discharged, unless a creditor convinces the court to have such debts declared exempt from discharge.

If you can't get at least half of your debts discharged, it's not worth the effort.

Chris Cooper is a retired attorney who has spent several periods of his life deep in debt. At http://www.credit-yourself.com he tries to pass on some of the knowledge he picked up in his journey to become debt free.

---

Ten Ways to Get Out of Debt

1) Use your AssetsIf you have assets with some significant... Read More

Reducing Debt Before Its Too Late - How to Avoid the Pitfalls of Creeping Debt

Reducing debt usually isn't a high priority for people until... Read More

What Are The Benefits and Consequences Of Getting Rid Of Debt The Easy Way

We have all experienced getting so far in debt we... Read More

Debt Settlement -- Why the Critics Are Wrong

After October 17, 2005, a lot of people are going... Read More

Stop Debt Collectors

Can you stop debt collectors ? . . .You better... Read More

The 5 Secrets to Getting Out of Debt Fast

As they stare down at a teetering pile of bills,... Read More

British Families and Debt

There is current concern from the Bank of England that... Read More

Save Money When Going Out

It seems as though whenever we go out for the... Read More

A Debt Elimination Process Must Be Initiated From You.

The first and maybe most important step in a debt... Read More

Currency Trading Fee Concept

Troubles with Global Economy; Do you see future problems with... Read More

Personal Debt Reduction Practices

Personal debt reduction practices, the steps people take to relieve... Read More

Is It Possible to Be Sued For My Debts?

It is possible for creditors and third-party collection agencies to... Read More

Credit Card Debt Freedom is Possible

Credit card debt have you drowning financially? You're not alone.... Read More

Debt Free Living - 5 Tips To Get Out Of Debt

A few times I wonder what sort of credit system... Read More

Debt Relief -- Why Most Programs Have A 75% Failure Rate

Debt consolidation, equity loans, credit counseling, debt management plans, even... Read More

Debt Elimination 3

Planning To Achieve Debt EliminationOnce you have started the process... Read More

Hide That Car! Fighting the Repo Man

Vehicle repossession may appear justified in circumstances where a person... Read More

What is Bankruptcy?

Personal bankruptcy is a legal way to give people with... Read More

Top Ten Reasons People File for Bankruptcy

1. Eliminate the legal obligation to pay many of your... Read More

Bankruptcy 101

Bankruptcy still remains a mystery in the eyes of many... Read More

Individual Voluntary Arrangements- A New Alternative to Bankruptcy

This May, the Department of Trade and Industry in the... Read More

Dealing with Thingitis

Debt is quickly becoming an epidemic in America. However, through... Read More

Bankruptcy: Who is to Blame?

If you are considering bankruptcy as a solution to your... Read More

Debt Consolidation and Personal Finances: Learn the Truth!

An inability to manage credit, growing debt and bankruptcy are... Read More

The ONE Law You Should Be Breaking

There is a law all smart people break.Parkinson's law.Parkinson's law... Read More