Personal Bankruptcy: The End Result Of Running Up Uncontrollable Debts
The thought of declaring personal bankruptcy is something that can make a debtor very nervous though it is something that has affected about 5.4 persons out of every thousand and this rate is only going up. According to research on the reasons why people declare personal bankruptcy, it has been found that the main reason is because people run up uncontrollable amounts of debt, which can even sometimes be due to unforeseen circumstances including things such exorbitant medical expenses that are not covered by an insurance policy or because of losing your job or going through a divorce or even because of death of your husband or wife.
Profile Of A Person Sure To Declare Personal Bankruptcy
The main profile of a person that files for personal bankruptcy seems to be, according to economists' survey, blue collar workers or a person with a high school qualification and who is the sole bread winner in the family, though who has used credit beyond limits. However, there are bankruptcy laws that have been established to protect both parties and which provide equal as well as fair means to satisfy both parties' objectives.
Thus, because of these bankruptcy laws, a debtor is able to make a fresh start in life and the creditor gets to be repaid in a timely manner to the extent that the debtor can clear off his or her debts.
Before filing for personal bankruptcy, you can choose from two different structured plans that are the Chapter Seven and Chapter Thirteen bankruptcies though more than seventy-five percent of personal bankruptcies are sure to be Chapter Seven bankruptcies, because this type of personal bankruptcy requires you to liquidate all of your non-exempt assets and then distribute them to the creditors.
If you go in for Chapter Thirteen bankruptcy, there is no need to liquidate your assets; instead, you need to agree to a set plan for repayment under which some part of unsecured debts need to be paid and the remaining part of your debt is waived off. However, there are certain debts that are not eligible for bankruptcy protection, either in Chapter Seven or Chapter Thirteen bankruptcy and examples of these include government student loans, alimony, child support as well as income tax debts, which must be repaid in full.
Worried that the increasing levels of debts could harm the national economy, the government has of late, made some pretty sweeping reforms to the bankruptcy laws including the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 that aims to make filing for personal bankruptcy harder through use of various means and ensure the financial health of the nation and its profligate debtors.
