Personal Bankruptcy: Undergoing A Personal Bankruptcy

Undergoing A Personal Bankruptcy - What You Need To Know

By Credit Help

About five people in every thousand have had to declare personal bankruptcy and these numbers are increasing ...

In most cases, the very thought of personal bankruptcy can frighten a person so much that they will feel panicked and very afraid of facing life. Unfortunately, about five people in every thousand have had to declare personal bankruptcy and worse, these numbers are increasing. What’s more, findings of research companies indicate that the main reason for declaring personal bankruptcy is excessive consumer payables that when combined with unforeseen and unplanned events can throw finances of a person totally out of whack.

The Typical Bankrupt Person

Major expenses to take care of losing one’s job, filing for divorce or dealing with the death of one’s spouse can prove to be disastrous. The typical person that files for personal bankruptcy is a blue collar worker and someone that has graduated from high school and who is also the head of a family (though of lower middle-income category) and who at the same time uses credit very heavily.

There are laws in place that help to protect both the debtor as well as creditor and these laws will actually ensure that honest debtors do not suffer too much on account of their present dire financial condition. The laws also protect the creditors who need to recover their outstanding debts.

In case you are planning on filing for personal bankruptcy you have two main options in front of you: either you can file for Chapter seven bankruptcies or you can file for Chapter 13 bankruptcy. The former type of personal bankruptcy requires that you liquidate each of your assets that are not exempted and then distribute the proceeds from the liquidation to the creditors.

Chapter 13 bankruptcy means that there is no need to liquidate assets; rather, it requires reorganizing the debt so that you can, in most cases, pays off the debts in a period of between three and five years.

There is however a fear among many analysts that see personal bankruptcy as being a real danger to the financial well-being of the economy and with good reason too. The numbers of people filing for personal bankruptcy are rising and this trend is worrying which in turn has led to some drastic steps having to be taken. Just recently, in the month of march of 2005 the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was enacted which forces people declaring for personal bankruptcy to undergo income tests and follow stricter guidelines before they are allowed to file for this form of bankruptcy.

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