Bankruptcy has had a bad reputation over the decades for some good and some bad reasons. The good reasons for a bad reputation all boil down to the issue of fraud: people who have assets and are hiding them from creditors, or people who went into business and ran up debt they could not afford, or consumers who bought "stuff" with credit (cards) with no ability to repay. In the later case, it's rather hard to repossess a vacation cruise, and in the former, if the money from profits is spent, it's gone for good. Unless intent to commit fraud can be shown, normally a Bankruptcy will wipe out debt.
Let's take a step back and discuss what a Bankruptcy does. Quite simply when a bankruptcy is filed, it protects the debtors from creditors. The are two main types of PERSONAL BANKRUPTCY - Chapter 7, where you eliminate debt without any repayment but surrender personal property and real estate that is not protected by law for the benefit of the creditors. A Chapter 13, requires that you have money left over every month AFTER paying REGULAR LIVING EXPENSES, and from the money remaining each month pay creditors on a pro rata basis.
The primary reasons for filing for protection from creditors are not voluntary: 1. Medical bills and illnesses 2. Loss of a job or substantial reduction in hours 3. A birth or death in the family 4. A two income household becoming a one income family 5. Bad money management. A DISTANT 6. is fraud - between 5% and 10%.
For whatever reason, people have a negative opinion of bankruptcy - yet people would be surprised to find out about friends and neighbors have filed for protection.
A different reason to have a more positive opinion of bankruptcy filings is that THE OLD AND NEW TESTAMENTS, AND THE QUR'AN all encourage a forgiveness of debt to those truly burdened. CREDITOR should FORGIVE the DEBTOR.
It makes no sense for a retired person on a fixed income to have to make a decision between food or medicine; or for a family to have to deny a child the presence of a parent so that parent can work 3 jobs to just pay basic bills. Please do not misunderstand: it is not suggested that filing a for protection from creditors is the first course of action to think about, but it should not be the last and considered after losing everything.
Simple tips:
1. Don't solicit credit cards or get as many as you can. Determine how much credit you need and can afford to repay with current income. Only borrower that much.
2. If you find yourself using credit for living expenses, seek a credit counseling service such as Consumer Credit Counseling Service or Money Management International - just be certain that it is a true not for profit agency, not a scam. If you have to pay a big up front fee - stay away. If you have a bank where you are known and are comfortable at a branch, ask if the bank has someone to help you budget your money.
3. As soon as you find yourself ready to get a second card or a loan to make payments on other cards or loans, consult an attorney who handles bankruptcy as she/he will also deal with basic debt counseling.
4. Don' let pride get in the way of keeping your peace of mind or all you have left is a piece of mind.
For more in-depth information visit my website http://www.isacofflaw.comor other resources like the National Association of Consumer Bankruptcy Attorneys, or the American Bankruptcy Institute.
Author's Copyright by Richard I. Isacoff, Esq, September,2011
rii@isacofflaw.com
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