MORE ABOUT BANKRUPTCY

“You load sixteen tons, and what do you get? Another day older and deeper in debt. St. Peter, don't you call me, 'cause I can't go, I owe my soul to the company store.”
- Merle Travis

Bankruptcy is a legal process in which the rights of creditors to collect debts are modified by Federal Law. Often, bankruptcy provides a person with a complete “fresh start” at financial freedom - the person's debt is erased and he or she is permitted to keep their basic assets (including their home and its equity).

Bankruptcy is not a process to be approached lightly as the potential negative effects can be long lasting. However, the yoke of debt can be an oppressive and depressing burden.

Once the burden of such debt is lifted and an individual receives a fresh start - the future belongs to him or her once again. Life and spirit can begin anew.

In fact, persons who file a Chapter 7 bankruptcy and simply wipe out their debt can often build great credit in just 2 to 4 years. This is because they no longer use their money to pay old bills; rather, they use it to make down payments on cars and homes and to pay on new credit cards. This positive post-bankruptcy credit activity helps to rehabilitate their credit score. They are not on the hook for old judgments and old credit. Plus, creditors know that a person cannot file bankruptcy again for many years. Contrast that with a person in debt consolidation or who is just stuck in the mire of trying to pay their minimums from here to eternity. While kudos should be extended to such martyrs, these persons often have NO extra income to pay for the basic necessaries of life. They often literally sacrifice food on the table in the mistaken belief that they will be rewarded with a better credit score down the line. Moreover, creditors know that such financially strapped persons may finally default because of being spread too thin, or that such persons may finally file the bankruptcy they have put off so long. One way or the other, it is usually a complete falsehood that debt consolidation will improve a person's credit score over one who has filed bankruptcy.

Here are some Frequently Asked Questions about bankruptcy:

• What is the Bankruptcy Code and what changes were made to it by Bankruptcy Reform Act?


• How about a brief overview of Chapter 7?


• If I can just file and get rid of all debt in a Chapter 7, why would I consider filing a Chapter 13?


• Can I see some examples of the Chapter 7 “Means Test”?


• What kind of property may I retain as “exempt”?


• How much does a bankruptcy cost?


• How can I find more detailed information about the bankruptcy process?


• How long does negative information like a bankruptcy or charged-off credit cards remain on my credit profile?


• Should I short-sell my home in lieu of a foreclosure?