There are many people today who were caught completely off guard in the recent financial downturn. Having been offered and taken easy credit, particularly credit card credit, they are now finding it difficult to meet even the monthly interest payments.
I specifically mentioned credit cards because it is credit cards that have got many people into trouble, although unsecured loans and larger than sensible mortgages have also played their part to a considerable extent.
One of the things about credit cards of course, is that balances can be transferred between cards, but this is simply robbing Peter to pay Paul and will in no way remove the debt.
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Many people wonder how they are going to cope, and stave off bankruptcy. Many enter into further borrowing but with an inadequate source of income to repay part or all of their debt, this additional borrowing simply delays the inevitable and adds to the debt mountain.
Whilst many people consider bankruptcy to be a last resort, they fail to realise that in many cases simply putting off the inevitable by increasing debt is making things far worse than they need be.
Rather than worrying about the supposed stigma attached to going broke, people would be very often better off cutting their losses by heading to the bankruptcy court, rather than face the consequences of spiralling ongoing debt.
The fact of the matter is that bankruptcy is there to assist those whose financial position has become hopeless. It is perfectly legal, and in the vast majority of cases results in a fresh start for the debtor.
There is however, a common misconception that as regards chapter 7 bankruptcy. Chapter 7 bankruptcy accounts for over 93% of bankruptcy filings in the US. The deal is that in exchange for all your assets, the bankruptcy court will take away your debt. In other words you hand all your worldly possessions over to the bankruptcy court trustee who then sells them, and distributes the proceeds amongst your creditors. It does not matter whether or not the proceeds are sufficient to pay off all your debt, as any outstanding debt is simply wiped away, or "discharged" to use the legal term.
The above paragraph is something that will often put people off claiming bankruptcy, and keep them accruing more and more debt to save their possessions. And this is the Misconception people have hair of chapter 7 bankruptcy.
The fact is that around 93% of chapter 7 bankruptcy cases are what are called "no asset" cases. In other words the debtor is considered to have no assets worth selling by the court trustee. This is generally the result of a combination of two things, the first being that the bankruptcy court is not interested in selling low value items to raise money for the creditors, and the second being that there are a number of exemptions as regards property. For example, any tools that are needed for the debtor to go about his normal course of business are generally considered exempt, as are most household furnishings.
The bottom line is that if one is considering bankruptcy is absolutely vital to employ the services of a specialist bankruptcy lawyer. They will not only help serve to put your mind at rest over certain specific issues and urban myths about bankruptcy, but they will be able to take as objective look at your financial affairs and ensure that you get the best possible deal from what is a fairly complex process.
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