Most American consumers are living too close to
edge. They are carrying too much credit card and mortgage debt and have too little in way of savings. When inevitable unexpected crisis comes along, they have little left to handle it and quickly slip into a critical financial state.According to many bankruptcy experts, most people file for bankruptcy due to life-changing experiences, such as a job loss, divorce or serious illness. Uninsured medical expenses are supposedly cause of about 20% of bankruptcy filings. But excessive debt also plays a very large role.
If you are drowning in debt with little realistic hope of paying off your bills, bankruptcy is your only real option. Although far from pleasant, bankruptcy can be easier to handle than constant pressure put on a debtor by lenders and collection agencies. You can immediately stop all harassment and legal actions, wipe out a good deal of your debt and get a new start on life.
The anomalies of credit scoring also work against debtors struggling to pay off debt. Your score will be low because of excessive use of debt and missed payments. You’re unlikely to get new credit and interest rates on your credit cards might be raised to usurious levels. You are likely to have a better credit score and find it easier to get credit – very expensive credit - after bankruptcy than before.
Also stigma and embarrassment that used to accompany bankruptcy has largely disappeared. To many, it has become just another financial planning tool.
The Bankruptcy Procedure
Bankruptcy courts are part of Federal court system. The bankruptcy law itself is a Federal law, although states can have their own laws, which govern such things as exemptions. Federal bankruptcy judges apply both Federal and state laws in jurisdiction where they sit. Debtors sometimes have a choice of which law should apply.
Bankruptcy proceedings are commenced by filing certain required forms and paying a fee. Filling automatically stays all legal proceedings against you as well as all debt collection actions. Fees can be paid in installments, but must be completely paid before dischare will be granted.
A trustee will be appointed. His job is to review your financial affairs, collect and sell assets, if necessary, and distribute proceeds to your creditors. If you are setting up a repayment plan, he will be responsible for seeing it implemented. He will even pursue your debtors to collect money owed you that can be used to pay off your creditors.
The trustee’s powers include power to set aside preferential transfers made to creditors within 90 days before filing of bankruptcy petition, power to undo security interests and other transfers of property that were not properly recorded under non-bankruptcy law at time petition was filed and power to pursue claims such as fraudulent conveyance and bulk transfer remedies available under state law.
