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Published by on Monday, December 29, 2008 at 3:10:00 PM

Bankruptcy - Easy Way Out or Life Altering Event

by: Dave Zwierecki - Is Bankruptcy really the "peaches and cream" that it is made out to be or is there much more to it than what we know? Bankruptcy is a somewhat complex procedure, and even more now so with the new Bankruptcy laws in effect, making it harder for people to abuse filing for Bankruptcy. Many people look at Bankruptcy as a "get out of jail free" card. That could not be any farther from the truth.

There are two basic types of Bankruptcy proceedings. The most common types of personal bankruptcy for individuals are Chapter 7 and Chapter 13. Of the two common forms of bankruptcy, one is a reorganization bankruptcy and the other is a liquidation bankruptcy. Individuals may enter a reorganization bankruptcy in order to retain assets and pay off reduced creditor claims out of the individual's income. Reorganization is most commonly known as Chapter 13 Bankruptcy. In the US, liquidation is known as Chapter 7 Bankruptcy, which refers to the chapter of the bankruptcy law that allows your assets to be sold off (liquidated) to pay creditors. In Chapter 7, a debtor surrenders his or her non-exempt property to a bankruptcy trustee who then liquidates the property and distributes the proceeds to the debtor's unsecured creditors. If a debtor does not qualify for relief under Chapter 7 of the Bankruptcy Code, either because of the "means test" or because Chapter 7 does not provide a permanent solution to delinquent payments for secured debts, such as mortgages or vehicle loans, the debtor may still seek relief under Chapter 13 of the Code. Falsifications on bankruptcy forms often constitutes perjury.

Recently there have been some major changes made to the bankruptcy laws. Under the old rules, most filers could choose the type of bankruptcy that seemed best for them, and most chose Chapter 7 (liquidation) over Chapter 13 (repayment).The new law makes it considerably more difficult for individuals to file for bankruptcy under Chapter 7, under which most of their debts are forgiven (or discharged), as opposed to Chapter 13, under which no debts are forgiven. The new law will also make it more difficult for serial filers to abuse the most generous bankruptcy protections. Under the old law, filers generally filed under Chapter 7, with the final determination made by bankruptcy judges, who evaluated the specific nature of each bankruptcy. The new law adds a number of new requirements for bankruptcy filers making the filing process more difficult and costly. All potential bankruptcy filers must now undergo credit counseling via an "approved nonprofit budget and credit counseling agency" prior to filing for bankruptcy. The new bankruptcy law brings some unwelcome changes for those who are considering bankruptcy. All debtors will have to get credit counseling before they can file a bankruptcy case.

There is more to filing bankruptcy than simply thinking you will just go see an attorney and all of your debts will be wiped away. It is a myth to think, I'll just file bankruptcy and start over, it seems so easy. The truth of the matter is that Bankruptcy is a gut-wrenching, life-changing event that can cause lifelong damage to a person's mental well-being along with their personal finances for a long time. Therefore, think long and hard and make sure you have exhausted all of your other options before deciding that you want or need to file bankruptcy. Bankruptcy is rated up there with some of the most traumatic life altering events such as loss of a loved one, serious illness, divorce and disability. Truly weigh your options before committing to filing for bankruptcy protection.

About The Author

Dave Zwierecki is a licensed mortgage professional with First Security Financial Services and has over 10 years of experience in the credit and mortgage lending fields. For more information, or to learn more, please visit
Published by IzajAhmed Shaikh.
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I am, Mr. IzajAhmed Shaikh, Computer Professional, and Pro. Blogger, who belongs to Shahabad, Karnataka India. My basic Qualifications are B.Sc., and M.C.M. done from University of Pune, formerly known as, Poona University, also like to write articles based on my personal experiences.