Thursday, February 26, 2009
MYTHS AND REALITY OF BANKRUPTCY
Bankruptcy is defined by Federal Court as a process of debt removal for individuals, couples and businesses under the jurisdiction of court. In United States of America the percentage of people filing bankruptcy has increased in last couple of years. People are thinking that this is the only way to get rid of debt without taking into account the aftermath of filing it.
In America the district courts are responsible to take care of bankruptcy filing under Federal Bankruptcy Act. Actually there are eight chapters that deal with bankruptcy. They are Chapter 1, Chapter 3, Chapter 5, Chapter 7, Chapter 9 Chapter 11, Chapter 12 and last but not the least is Chapter 13. Among these Chapter 7 and Chapter 13 are called personal bankruptcy which is most common.
Filing bankruptcy depends on few things. One of the major reasons is job loss. If a person suddenly lost his or her job then it is possible for a person to declare bankruptcy as at that point of time that person won’t be able pay the debts that are due. Divorce is also a reason for filing bankruptcy. As a couple get separated, one of them and sometime both of them suffer financially leading to bankruptcy filling. Credit cards are also helping bankruptcy to rise. More credit card usage means more debts which some time become very hard to pay off and thus ending up in filing bankruptcy. Bankruptcy is also due to the reason of increase in debt income ratio. If the maximum portion of gross income of a person is used in paying off debts and the ratio continue to rise then bankruptcy is inevitable.
Even if a person can find a solution to end debt problems then also most will choose bankruptcy. This is due to certain myths. They thought that all the debts will be eliminated if they file for bankruptcy. But the thing is not so simple. All the debts are not eliminated. Debts like taxes, child support and few others are not eliminated. Most people believe that filing bankruptcy will make their life like before. But actually bankruptcy forces you to start a life with a black spot in the financial status of a person.
Actually bankruptcy is associated with lots of bad impacts. The credit report is affected badly which prohibits a person from any loan and some time from jobs also. Due to bankruptcy a person can loose his or her valuable belongings like car and even home affecting the social status of that person.
So bankruptcy is a decision which should be taken seriously and a person must consider it as the last resort.
In America the district courts are responsible to take care of bankruptcy filing under Federal Bankruptcy Act. Actually there are eight chapters that deal with bankruptcy. They are Chapter 1, Chapter 3, Chapter 5, Chapter 7, Chapter 9 Chapter 11, Chapter 12 and last but not the least is Chapter 13. Among these Chapter 7 and Chapter 13 are called personal bankruptcy which is most common.
Filing bankruptcy depends on few things. One of the major reasons is job loss. If a person suddenly lost his or her job then it is possible for a person to declare bankruptcy as at that point of time that person won’t be able pay the debts that are due. Divorce is also a reason for filing bankruptcy. As a couple get separated, one of them and sometime both of them suffer financially leading to bankruptcy filling. Credit cards are also helping bankruptcy to rise. More credit card usage means more debts which some time become very hard to pay off and thus ending up in filing bankruptcy. Bankruptcy is also due to the reason of increase in debt income ratio. If the maximum portion of gross income of a person is used in paying off debts and the ratio continue to rise then bankruptcy is inevitable.
Even if a person can find a solution to end debt problems then also most will choose bankruptcy. This is due to certain myths. They thought that all the debts will be eliminated if they file for bankruptcy. But the thing is not so simple. All the debts are not eliminated. Debts like taxes, child support and few others are not eliminated. Most people believe that filing bankruptcy will make their life like before. But actually bankruptcy forces you to start a life with a black spot in the financial status of a person.
Actually bankruptcy is associated with lots of bad impacts. The credit report is affected badly which prohibits a person from any loan and some time from jobs also. Due to bankruptcy a person can loose his or her valuable belongings like car and even home affecting the social status of that person.
So bankruptcy is a decision which should be taken seriously and a person must consider it as the last resort.
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