Wednesday, June 3, 2009

Personal Bankruptcy - A Very Stressful Thought

By Jon Arnold

In the majority of cases, merely considering personal bankruptcy is enough to panic somebody so much that they be tempted to panic and be reluctant to look at their financial troubles. Unfortunately, statistics indicate that around five people out of every thousand have seen themselves filing for personal bankruptcy and even more distressing, this number is rising. Additionally, studies from research companies show that the fundamental reason that people are filing for personal bankruptcy is due to extreme spending which accounts for excessive debt. If these same people then get the financial weight of unplanned and unforeseen situations this can throw their budgets into complete turmoil.

There are numerous reasons why an individual might elect to file for bankruptcy. Losing a job or paying for divorce proceedings are all too common as is the death of a spouse. All have the potential to indicate disaster for your money and budget. The typical person that selects to file for bankruptcy is normally one who successfully graduated from high school, is a blue collar worker, and is also the head of the household, even though they are in all probability in the class of lower middle income. At the same time this person is also going to have stretched their finances too far and probably relied heavily on credit in the past.

Laws presently are in place that work to protect both the creditor and debtor and these laws are in place to make sure that those individuals who are honest suffer as little as possible because of their financial mismanagement. The same laws also provide protection to the creditor and helps them to recover any funds they are owed.

If you are seriously considering filing for personal bankruptcy there are two choices available to you. The first is that you can opt to file for Chapter 7 bankruptcy. The second option is Chapter 13 bankruptcy and both differ quite substantially. Chapter 7 bankruptcy requires each of your assets (that are not exempted) to be sold off and the proceeds of these assets will be dispersed amongst your creditors to fulfill the debt owing to them.

Chapter 13 bankruptcy is a more or less gentler option in that it does not expect any elimination of your assets. It does however require you to reorganize your debts in such a way that you are able to pay off the debts over a timeframe of between three and five years.

One of the aspects that many individuals do not think of, however, is that the choice of which chapter to file is not their choice. This is a determination of the courts, who will make that decision after a careful inspection of your particular financial data. It is because of this that a bankruptcy lawyer is highly recommended so your data can be shown in the right light.

However, fear exists amongst many financial analysts who view personal bankruptcy as a real menace to the wellness of the economic system and there is good grounds for this. The count of individuals who file for personal bankruptcy is rising which in turn causes a disturbing trend. In turn this has prompted some dramatic measures being taken.

Only recently, in March 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was introduced and this forces individuals who file for personal bankruptcy to undergo a number of tests on the condition of their income and to cling to tighter regulations before they are permitted to declare this type of bankruptcy.

For more insights and additional information about a Personal Bankruptcy as well as getting a free bankruptcy evaluation from a qualified and experienced bankruptcy lawyer in your area, please visit our web site at

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