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ÿþPersonal Bankruptcy: A Very Worrying Thought

In the majority of cases, just thinking about personal bankruptcy is enough to scare somebody so much that they will panic and be afraid to face their financial problems. Unfortunately, statistics show that approximately five people out of every thousand have found themselves declaring personal bankruptcy and even more worrying, this figure is on the rise. In addition to this, reports from research agencies show that the main reason that people are filing for personal bankruptcy is because of excessive spending causing excessive debt. If these same people then experience the financial burden of unplanned and unforeseen circumstances this can throw their finances into complete turmoil.

The Typical Bankrupt Person

There are many reasons why a person might file for bankruptcy. Losing a job or paying for divorce proceedings are common as is the death of a spouse. All have the potential to spell disaster for your finances. The typical person that chooses to file for bankruptcy is usually someone who has graduated from high school, is a blue collar worker, and is also the head of the household (although they are probably in the category of lower middle income). At the same time this person is also going to have stretched their finances too far and will have relied heavily on credit in the past.

Laws currently exist that work to protect both the creditor and debtor and such laws are in place to make sure that those debtors who are honest suffer as little as possible due to their financial mismanagement. The same law also offers protection to the creditor and helps them to recover any monies owing to them.

If you are considering filing for personal bankruptcy there are two choices available to you. The first is that you can choose to file for Chapter 7 bankruptcy. The second option is Chapter 13 bankruptcy and both differ quite substantially. Chapter 7 bankruptcy requires each of your assets (that are not exempt) to be liquidated and the proceeds of these assets will be dispersed amongst your creditors to satisfy the debt owing to them.

Chapter 13 bankruptcy is a slightly gentler option in that it does not require any liquidation of assets. It does however require you to reorganize your debts in such a way that you are able to pay off the debts over a timescale of between three and five years.

However, fear exists amongst many financial analysts who regard personal bankruptcy as a real thread to the health of the economy and there is good reason for this. The number of individuals who file for personal bankruptcy is increasing causing a worrying trend. In turn this has led to some dramatic measures being taken.

Only recently, in March 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was introduced and this forces individuals who file for personal bankruptcy to go through a number of tests on the state of their income and to adhere to stricter regulations before they are permitted to declare this type of bankruptcy.

This entry was posted on Wednesday, July 1st, 2009 at 4:11 pm and is filed under Bankruptcy. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.

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