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The Facts About Personal Bankruptcy
Author: Jay Stockman
The thought of personal bankruptcy is very frightening, however
over 5.4 per 1,000 people have filed for bankruptcy last year,
and this rate has been growing at an average of nearly 7
percent. Researchers have determined that the primary cause of
personal bankruptcy is uncontrollable levels of consumer debt
oftentimes coupled with an unexpected event, such as a major
medical expense not covered by insurance, the loss of a job,
divorce or death of a spouse. According to economists' surveys,
the classic bankruptcy filer is a blue collar, high school
graduate who is the head of a household in the lower
middle-income class with heavy use of credit. In order to
protect both debtor, and creditor, laws were enacted to provide
equal, and fair measures to satisfy the objectives of all
parties. The primary purpose of the laws of bankruptcy are: (1)
to give an honest debtor a fresh start in life by relieving the
debtor of most debts, and (2) to repay creditors in an orderly
manner to the extent that the debtor has property available for
payment.
There are two types of structured plans for filing for personal
bankruptcy, Chapter 7 or Chapter 13. Over two-thirds of personal
filers choose Chapter 7 bankruptcy. Basically Chapter 7 requires
the debtor to liquidate all non-exempt assets, and have them
distributed among creditors. Some examples of exempt assets
include equity in a primary residence, and a retirement program.
On the other hand, Chapter 13 does not require liquidation,
rather a debtor agrees to a specific payment plan, whereby a
portion of any unsecured debts is paid, and the balance is
forgiven. It must be stressed, that under both plans, certain
debts are ineligible for bankruptcy protection. These debts
include government student loans, child support, alimony, and
income tax debt. These must be paid back in full.
Some analysts are concerned that this unprecedented level of
debt might pose a risk to the financial health of American
households. In an attempt to reverse the increasing trend in
personal bankruptcy, the federal government has recently
implemented sweeping bankruptcy reform legislation. On March 10,
2005, the Senate passed S. 256, the Bankruptcy Abuse Prevention
and Consumer Protection Act of 2005. On April 20th, President
Bush signed into law the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005 (Bankruptcy Act of 2005). This
act makes filing for bankruptcy more difficult through
income-means testing, tougher guidelines for the homestead
exemption, increased lawyer liability and required credit
counseling.
About the author:
Jay B Stockman is a contributing editor for Online Bankruptcy
Resources Visit http://online-bankruptcy-lawyer.com/ for
more information.
Article Keywords:
Bankruptcy |
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A Quick Note
From The Publisher...
If you like the article above, you may be
interested in the following article which is also related to Bankruptcy...
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Bankruptcy Attorney - Utilizing their Expertise and Choosing the Right One |
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Bankruptcy can be the biggest burden to an individual, small
business or a multi million dollar corporation. Bankruptcy is a
condition where the business cannot meet its debt obligations
and petitions as well. In the action, the debtor pays his
property to the creditors. This action is maybe voluntary or
involuntary, and conducted as prescribed by the National
Bankrupt Act. When this happens, there should be no worries
because there is a bankruptcy attorney to help you to set your
assets in order, and smoothly take care of the files for
bankruptcy.
Finding a lawyer for this kind of devastating problem is
relatively easy. Bankruptcy attorneys specialize in bankruptcy
law and can provide legal methods for an individual or
commercial enterprise to either wipe out the debts by
liquidating assets and distributing them among creditors or
resolve them by developing a court approved reorganization plan,
or the plan or other plan involving the repayment of the
creditors... |
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