Bankruptcy - Your Fresh Start - Part One

Bankruptcy Can Ease Tremendous Emotional & Financial Burdens, But at a Price

Bankruptcy was America's answer to debtor's prisons. Before the Revolution, if you couldn't pay your debts, you went to jail until you or one of your relatives satisfied your creditors.

But I don't think that our founding fathers meant for bankruptcy to become an easy way to walk away from debt. Originally it was considered a last resort and carried substantial social and financial stigma.

People used to commit suicide rather than face bankruptcy. After the Great Depression, many spent the rest of their lives repaying debts that had been discharged in bankruptcy.

But Bankruptcy is the law and it is meant to help those with unpayable debt get a fresh start.

Too many American consumers are living too close to the edge. They are carrying too much credit card and mortgage debt and have too little in the way of savings. When the inevitable unexpected crisis comes along, they have little or nothing left to fall back on and quickly slip into a critical financial state.

According to many bankruptcy experts, most people file for bankruptcy due to life-changing experiences, such as a job loss, divorce or serious illness. Uninsured medical expenses are supposedly the cause of about 20% of bankruptcy filings. But excessive debt also plays a very large role.

If you are drowning in debt with little realistic hope of paying off your bills, bankruptcy is your only real option. Although far from pleasant, bankruptcy can be easier to handle than the constant pressure put on you by lenders and collection agencies.

You can immediately stop all harassment and legal actions, wipe out a good deal of your debt and get a new start on life.

The anomalies of credit scoring also work against debtors struggling to pay off debt. Your score will be low because of excessive use of debt and missed payments.

You're unlikely to get new credit and the interest rates on your credit cards might be raised to usurious levels. You are likely to have a better credit score and find it easier to get credit - very expensive credit - after bankruptcy than before.

Also the stigma and embarrassment that used to accompany bankruptcy has largely disappeared. To too many, it has become just another financial planning tool.

Is Bankruptcy for You?

There is no simple answer to that question.

If you're behind because you're temporarily unemployed, what happens if you can't find work after the bankruptcy? You will still continue to pile up bills, but will no longer have any way around them.

Also, if potential employers check your credit report, you might not get a job at all. So the answer is maybe not.

If you've got many thousands of dollars of unpaid medical bills on top of a mortgage and car loan and there's just no way you're ever going to pay it all, bankruptcy is probably the only way out.

In spite of the seeming ease with which you can get a discharge of your debts, it still should be your last option, especially if you have valuable assets you want to protect.

Changes in the bankruptcy law, enacted in 2005, require a consultation with a credit counselor before you can file for bankruptcy. The counselor will tell you which chapter you can file under.

Use this consultation to see if you have any alternatives. At this stage you need objective, impersonal advice to help you make the right decision. The counselor may know of options you haven't considered or he may be able to work with creditors to help buy you time to get your affairs back in order.

For a consultation with a local bankruptcy attorney, click here or, if you live in southern California, set up an appointment with a San Diego Bankruptcy attorney, Kerry Steigerwalt..

For more information about bankruptcy and the bankruptcy procedure, go to part two of Bankruptcy..

Bankruptcy Reform Coming
How the Bankruptcy Reform Act will affect future filers.

Chapter Seven Bankruptcy and Your IRA's
Are self funded retirement plans exempt from Bankruptcy proceedings?

The Changes Caused by Bankruptcy Reform
Highlights of the new provisons of the bankruptcy reform act and how they will affect consumers.

Life After Bankruptcy
What to expect after a bankruptcy discharge.

Bankruptcy Fallout
Why bankruptcy is not always a good idea.

Bankruptcy Property Exemptions
Property exemptions vary from state to state.

Chapter Seven Filing Procedure
How to file for a Chapter Seven Bankruptcy.

Credit Card Debt after Bankruptcy Reform
Bankruptcy reform does not prevent discharge of credit card debt.

Is it Time to File for Bankruptcy?
Is this couple's only option bankruptcy?

The Unpleasant Effects of Bankruptcy
Coping with the aftermath of a bankruptcy discharge.

The Effects of Bankruptcy
How things will change after bankruptcy.

Bankruptcy and Marriage
Does a pre-marriage bankruptcy affect your new spouse's credit score?

Bankruptcy and Marriage - Part Two
How one spouses bankruptcy filing effects the other.

Debt Collection after Bankruptcy
Can a lender try to collect on a bill discharged in bankruptcy?

Bankruptcy and Taxes
How a bankrutcy can affect your tax refunds.

Canadian Credit Scoring
Applying for a Canadian mortgage after a bankruptcy discharge.

Co-Signer's Obligations
A co-signer is still responsible for the debt even if the primary borrower goes bankrupt.

Hospital Bill Bankruptcy
Dealing with a deceased spouse's unpaid final expenses.

Negotiating with Lenders
You have to realistic when renegotiating mortgage terms with lenders.

Notice of Hearing from Bankruptcy Trustee
Why would an ex-spouse receive a notice of creditors meeting from a bankruptcy trustee?

Filing After Bankruptcy Reform
How bankrupctcy reform has changed the filing process.

Buying a House After Bankruptcy
How bankruptcy affects mortgage interest rates.

On The Brink of Bankruptcy
Sometimes bankruptcy is the only option.