Filing bankruptcy is a nightmare for anyone. While it is not something you might like to even think about, there might come a time when you might have to comprehend the bankruptcy laws and file one yourself. But how can you know whether filing bankruptcy is the right thing for you? Or whether you can prevent it? What exactly is bankruptcy?
For starters, bankruptcy is a federal court process to help individuals and businesses repay their debts under the protection of the bankruptcy court (Chapter 13 Bankruptcy) or get rid of their debts completely (Chapter 7 Bankruptcy). If an individual or business files for bankruptcy, the court issues a stay that prohibits creditors from taking any action to recover the debts from you without court approval.
Bankruptcies fall under to broad categories - liquidation and reorganization. US bankruptcy laws cover liquidation under Chapter 7 Bankruptcy, which allows your assets to be sold off or liquidated to pay off your debts.
The other type of bankruptcy - reorganization is more commonly referred to as Chapter 13 Bankruptcy. Under reorganization bankruptcy, a repayment proposal is worked out with the court and accordingly some debts are repaid in full, others as a percentage of the original debt while some others are signed off without repayment. A reorganization bankruptcy would usually be spread over three to five years.
But after filing for reorganization bankruptcy, it is very important you stick to the repayment plan because it is only at the end that creditors might grant you new credit. While a liquidation bankruptcy stays on your credit history for 10 years and you are denied credit during this period, a reorganization bankruptcy can be cleared off your credit history after 6 years. And depending on your repayment record, you can reestablish your credit.
Bankruptcy filing has serious consequences and bankruptcy laws don't look easily upon individuals or businesses filing for it. The decision to file bankruptcy should not be taken easily because having your debts erased does not miraculously solve your long term financial issues. This can only be a once in a lifetime resort to get out of crushing financial burden brought on your by job loss, medical bills, or other circumstances that are out of our control.
The best way to avoid bankruptcy is to be both "penny and pound wise," meaning practicing good money management. This includes avoiding impulse spending, not using a credit card unless you have the cash to pay it off, tearing up any special credit card offers received, devising and following a realistic budget and covering yourself adequately by insurance (medical, homeowners, auto). At the same time, you need to make sure you don't speculate too much or fall into company with people who have questionable financial habits.
- Related Videos
- Related Articles
- Ask / Related Q&A




Identity Theft: Protect Yourself
By: John Chase | 12/11/2009In the digital age, one of the biggest threats to your personal safety is identity theft. A complete stranger here or on the other side of the planet can take just a few pieces of information about you, and detroy your credit for their personal gain.
Background Checks Before Dating
By: Gary Taylors | 12/11/2009With today's technology, there are so many ways to find people in your area or across the globe that share similar interests and beliefs as you, people you really connect with on a personal and intimate level. But how much do you really know about these people? Background checks reveal more than you would think!
The Limitations of Canadian Pardons
By: Jared Church | 12/11/2009If you are seeking a pardon for your criminal offences in Canada, you may wish to know some of the limitations associated with pardons.
What is Personal Injury Law?
By: Erich Shrefler | 12/11/2009People become injured in accidents every day. In many cases, the injuries sustained are minor and can be handled with home remedies, a little rest and some tender loving care. Unfortunately not all personal accidents are so easy to manage.
Pedestrian Accidents
By: Erich Shrefler | 12/11/2009While pedestrians enjoy the right of way in theory, in many pedestrian accidents, inattentive, speeding, or intoxicated motorists violate that right. Unfortunately, it is the unprotected pedestrian that pays the price in a pedestrian accident.
Benefits of Each Type of Court Reporter
By: Adrianna Noton | 12/11/2009Court reporting is one career that is in great demand. During any court session or other setting that requires a legal record, a record will be recorded by a court reporter. The job of a court reporter involves recording the spoken word during a session such as a deposition, discovery...
The Foreclosure Sale
By: Charlotte Foreclosure Attorney - Zellers Rudd | 12/11/2009fter the Foreclosure Hearing in which the Clerk of Superior Court approves the sale of the property being foreclosed, the Trustee will hold a Foreclosure Sale at the county courthouse in which the property is located. At the Foreclosure Sale the Trustee invites offers to buy the property from those in attendance and then accepts the highest bid. The highest bidder is bound by his offer the moment it is accepted.
Do you want a penal attorney? You must know in what way to select him!
By: Robert Farley | 12/11/2009The penal case is very earnest one and you mustn't falter for a long time searching for a good experienced attorney. But at the same time your resolution touching your attorney should be thought-out because your attorney is the just one human who is able to protect you or your relatives from accusation. So as we understand the main role of the penal attorney as any other lawyer is to present the defendant during the process and stand up for his rights and liberty. Thus in a case y...
Earning Your Home Economics Degree Online
By: Ian Koch | 27/08/2006 | Non-FictionMany people are heading online to earn their degrees in such areas as home economics and business administration because it allows them to pursue their degree at their convenience
Obtaining an Education Loan For Distance Learning
By: Ian Koch | 27/08/2006 | EducationIf you have decided to pursue your education through distance learning then you may be wondering what financial support options exist out there for you pay for your education.
Locating the Colorado Malpractice Lawyers
By: Ian Koch | 27/08/2006 | LawIn Colorado there are a number of lawyers for this purpose. There are websites and directories available in the internet for this purpose.
Understanding the HOPE Scholarship Program
By: Ian Koch | 24/08/2006 | EducationHOPE stands for "helping outstanding pupils educationally". The HOPE scholarship program is a high valued, famous and unique scholarship program of the state of Georgia.
Car Accident and Florida Lawyer- an Inseparable Pair
By: Ian Koch | 24/08/2006 | LawIn Florida, lawyers are, many in numbers and many of them are efficient in handling the accident borne injuries or loss of life. The highly reputed lawyers might have handled numerous cases at a point of time.
Studying At the George Mason University
By: Ian Koch | 24/08/2006 | Non-FictionMost of the courses of this university are offered in the Fairfax Campus. The university is just a few minutes away from Washington DC.
Making Use of the Business Travel Directory
By: Ian Koch | 24/08/2006 | ManagementA business traveler might face a lot of difficulties during travel from one place to another around the world. The difference in the culture, food, mode of travel and location play an important part during the travel. How do he or she handle this?
Color Contact Lenses That Come in Different Colors and Effects
By: Ian Koch | 24/08/2006 | HealthColor contact lenses are mostly used by teenagers now-a-days to change their looks while attending parties and other special occasions. There are people who want to have a different look and changing the color of their eye gives that changed look.