Business and Wealth

In many cases, bankruptcy can be avoided if the habits that lead to one filing bankruptcy are curbed early on in life. It is never too soon for individuals to learn how to avoid bankruptcy.

People in the United States tend to live on credit quite a bit. Many individuals feel pressured to keep up with neighbors, friends and family and end up overextending themselves on their credit cards. Unfortunately, credit card lenders are pretty indiscriminate as to who they issue credit. There are hundreds of thousands of credit card companies in the United States today. And once someone gets one credit card, chances are they will begin to see many offers coming through the mail for more credit.
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Filing bankruptcy is a personal, and often a very emotional decision. Thousands of people each year file different types of bankruptcy petitions to either eliminate or consolidate their debt. Although the laws for filing bankruptcy have become more stringent in recent years, many people who find themselves in a situation where they cannot possible pay their bills. Most bankruptcy cases involve people who have met financial hardship through a series of difficult circumstances and to whom bankruptcy is the last resort. Many people feel that filing bankruptcy is the ultimate sign of defeat and feel ashamed and embarrassed. In many cases, people filing bankruptcy are not solely to blame for their predicament.

Women filing bankruptcy in federal court often end up in bankruptcy court due to a divorce. Although more women work outside of the home than ever before, some women who undergo a divorce find themselves with more bills to pay than there is money. In many cases, when a couple splits up, the marital debt is divided between both parties. In many instances, one or both of the parties do not have the money to pay off the debt by themselves. The debt on credit cards usually incurs a high interest rate as well as late fees. Missing a couple of payments on a credit card can really take a financial toll on an individual. The combination of high credit card bills with substantially decreased income is a recipe for bankruptcy. About thirty percent of people who file bankruptcy do so because of a divorce.
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Many individuals who file bankruptcy do so under Chapter 13 bankruptcy laws. A Chapter 13 bankruptcy consolidates your debt, eliminates interest payments due to creditors and, in most cases, lowers the debt. This is all done under the protection of Federal Bankruptcy court. The individual who files Chapter 13 bankruptcy is then protected from creditors as that they cannot sue the individual to pay money or interest. The creditors have to take the amount given to them by the bankruptcy court and can not harass the debtor for additional money.

Filing Chapter 13 bankruptcy is similar to consolidating your debt with a debt consolidation company, but has many more advantages. Very few people realize that by consolidating their debt through with a debt consolidation company, they damage their credit just as they would with filing a Chapter 13 bankruptcy. Although the debt consolidation company is supposed to be a “free” service, as they are prohibited by law for charging, most of them charge a “donation” fee each month that, when accumulated, is a lot more than the filing fee needed in bankruptcy court. For this reason, if an individual is thinking about using a debt consolidation company, they are better off filing a Chapter 13 bankruptcy.
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Just as certain assets are exempt from bankruptcy, so are certain debts. Certain debts that you may accumulate will still have to be paid, whether or not you file bankruptcy. These debts are considered debts exempt from bankruptcy law.

One example of debts exempt from bankruptcy is child support. If you have been ordered to pay child support payments, or maintenance, by a court order, filing bankruptcy will not alleviate these debts. Child support debts will not be reduced or eliminated, whether or not you file Chapter 7 or Chapter 13 bankruptcy. Many people try to avoid paying these obligations, but child support is considered to be one of the debts exempt from bankruptcy.
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An individual filing bankruptcy can file under two different chapters: Chapter 7 and Chapter 13. Most bankruptcy petitions are filed under Chapter 7. A Chapter 7 bankruptcy relieves the debtor of most of their debts and gives them an opportunity to start again in building and maintaining credit.

Although the laws have changed significantly over the past several years regarding Chapter 7 bankruptcy, the purpose of filing Chapter 7 has not changed. Most people who file Chapter 7 bankruptcy have found themselves with insurmountable debt that they are unable to pay off. In many cases, the debt has been accumulated on credit cards that often have high interest rates. As the individual struggles to pay even the minimum balance due, the credit card balances continues to rise, leaving the debtor in a financial quandary.

If an individual loses their job, gets divorced or is hospitalized while already having high credit card debt, the result can be financially catastrophic. Many individuals who file a Chapter 7 bankruptcy earnestly want to pay off their debts, but have no viable means in which to do so. Someone who incurs $50,000 in debt can easily spend the next twenty years paying it off, even at little or not interest.

For this reason, thousands of people each year choose to file Chapter 7 bankruptcy. A Chapter 7 bankruptcy must be filed in Federal bankruptcy court through a bankruptcy petition. Many people engage an attorney to take care of this matter for them.

Once the Chapter 7 bankruptcy petition is filed, the debtor is protected from creditors. During this period, which usually lasts for 45 days, the individual must tell any creditors who call that he or she has filed Chapter 7 bankruptcy. Once a creditor learns that an individual has filed Chapter 7 bankruptcy, they are prohibited by federal law for continuing to call for money, or from instigating a lawsuit.
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The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 received a lot of objection from bankruptcy lawyers, judges and consumer advocate groups. Many felt that this act, which became effective on October 17, 2005, would hurt consumers who got in over their head with credit card debt and not give them the option eliminating the debt and starting fresh.

The purpose of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, with regard to bankruptcy, was to eliminate people who took advantage of the bankruptcy laws for their own gain. For most people, filing bankruptcy is one of the most traumatic experiences they have to endure. Most people who file are ashamed and embarrassed at having failed to pay their debts. Most people are raised to pay off their debts in a timely manner and most Americans are very credit conscious individuals. We worry about our credit scores and borrowing power to the point of mania.
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Many people think that when someone files bankruptcy, they lose everything they own: House, car, clothes and furniture. This is not the case. Most items that people need to live are assets that are exempt from bankruptcy law. Even with the new bankruptcy laws intact, those who file bankruptcy are able to keep personal items that are exempt from creditors, with certain stipulations.

Bankruptcy filing is mandated by federal courts. For this reason, bankruptcy law is the same throughout the United States. Bankruptcy petitions are filed in Federal court in what is known as “bankruptcy court.” An individual or their attorney files a petition in bankruptcy court asking for protection from the court against creditors and, if filing Chapter 7, elimination of their debt.
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The advantages of bankruptcy give a debtor relief from insurmountable debt that is difficult or impossible to pay. Unlike days of old, there are no debtors prisons in the United States or most of the civilized world. People who do not pay their bills, however, are subject to being named in a lawsuit by their creditor. One of the advantages of bankruptcy is that once the petition has been filed, creditors are no longer able to contact you for money.

Filing a bankruptcy petition in federal bankruptcy court gives you automatic protection against creditors. If a creditor calls your home after you have filed the petition, you must tell them that you filed bankruptcy. In many cases, the creditor will want to know the case number, which you should provide. Like most cases filed in both federal and state court, bankruptcy case records are open to the public. There is no point in trying to hide your case number from your creditor as they will have to be notified of the proceedings anyway.
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