This nation is built on credit, and consequently, it is built on a lot of money that people do not possess at the time they spend it. People rarely pay for their house, car, or education outright, and because of this, many Americans from varying socio-economic backgrounds find themselves in debt. While there are various options in the form of loans and mortgages that provide the ability to pay for these various necessitates and luxuries, many times people’s eyes are bigger than their stomach, and months or years later they find themselves in a situation where the payment of these outstanding debts is no longer feasible.
Some people believe “bankruptcy” is a bad word that carries many negative connotations. However, bankruptcy is a useful tool for both individuals and companies that find themselves in a hopelessly insolvable financial situation. While it would probably take an educated bankruptcy lawyer or accountant to tell you the various advantages and disadvantages of declaring bankruptcy in ones specific situation, it is helpful for everyone to know a little more about the process, and how maybe in the end, bankruptcy is not necessarily as bad as many people like to think.
For individuals that find themselves in a financial situation in which they are no longer adequately able to pay off their debt, there are two types of bankruptcy on in this situation could file. Chapter 7 bankruptcy is most commonly utilized by individuals that choose to declare bankruptcy. It involves the liquidation of all assets in order to pay off as much debt as possible, then a general forgiveness on the remainder of the debt owed, although there are exceptions for both what you have to liquidate and what is exempt from forgiveness.
Another option for an individual declaring bankruptcy is to file a Chapter 13 Bankruptcy. Chapter 13 bankruptcy allows an individual to pay off his debt over time. The process starts when the individual files a petition with the bankruptcy court. This petition includes a complete list of all the individual's debts and assets. Additionally, the petition must include a payment plan that describes how the debt will be paid off over the next three to five years. This option tends to be most helpful to individuals who have a steady income, since they will (eventually) be able to pay off the debt.
While some continue to fear the word “bankruptcy,” more people should remove their inhibitions and realize the inherent attributes of getting a fresh start. Some researchers have even gone so far as to say, our economy would benefit if more and more people did declare bankruptcy. But, like every process in law, it is important to consider both sides, be aware of disadvantages, and realize that bankruptcy is not necessarily for everyone either.
By Evan Anderson
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