Considering Bankruptcy -- Is This Really An Efficient Instrument For Debtors?

By: Dean Shainin
Submitted: 2007-01-17 16:17:21
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Considering bankruptcy ought to be a last option in attempting to resolve any debt problems. Realizing the conditions for bankruptcy, what kinds of debts bankruptcy won’t be able to discharge, as well as the long term effects it can have on credit records, may help people to decide right when considering bankruptcy.

Practically, a person knows that it’s not right to file for bankruptcy when he is not bankrupt, that is – he has the means to pay for his financial obligations. The new assumption is that if a debtor can make payments, then he must pay his debts. If he can’t possibly pay all his debts, then that’s the time for considering bankruptcy. It shouldn’t be a problem turning to a Chapter13 Bankruptcy for assistance, and protection, if a person has a regular income that only needs reorganization, so he can repay all or only a part of his debts. Also under the Chapter13 Bankruptcy are the advantages of stopping a mortgage foreclosure wherein the lender demands immediate payment of a huge sum (even the entire loan amount) due to missed regular payments, as well as freeing you of lesser debts to have more disposable income to keep up with your mortgage, allowing you to keep your (non-exempt) properties from being sold to discharge your debts, and also ‘cramming down’ some secured debts (not purchased less than one year) that demand higher debts than the original price of the commodity you owe.

Yet, there still are significant concerns in considering bankruptcy:

Bankruptcy may be an efficient instrument for debtors, yet it cannot eliminate all vital debts like child support, alimony, most tax debts, student loans, and creditor-secured debts. Considering bankruptcy then should take into thought the value of these debts instead of viewing bankruptcy only in terms of using it as an exploitable financial remedy.

Nevertheless, bankruptcy is a meant for removing or reducing unsecured debts like credit card debt (not all) and other unsecured debts of minor value. Also, bankruptcy is just the thing intended for putting off serious creditor harassment and legally putting payments on hold due to temporary crises or unforeseen circumstances.

Again, bankruptcy cannot help in escaping important (but undermined) debts such as child support and alimony obligations, neglected tax debts, reconcilable student loan debt, or lien-secured (property-replaceable) debts. Other debts that cannot be possibly discharged are debts not listed in the bankruptcy papers, debts for property damage, personal injury or death caused by inappropriate behavior (e.g. drunk-driving), fines and penalties imposed for law-violation (traffic-tickets and criminal reimbursement), recent income-tax debts, luxury goods, and debts incurred through fraud, such as lying on a credit application or passing-off borrowed property to use as collateral for a loan.

What’s the real reason behind bankruptcy?

Are easy credit cards to blame?

You can get credit after bankruptcy and rebuild over again once a debtor receives his discharge. Yet, it could still take several years before one can get back decent interest-rates on a credit card, mortgage, or car loan, and debtor cannot spoil credit after bankruptcy – not this time. It could take another 8 long-years before a person can file for another personal bankruptcy.

Remeber it's probably the easy credit cards that caused the problems in the first place and or ones lack of education in regards to financial concerns. You do not want to repeat your mistakes when re-building your credit.

Dean Shainin offers online Bankruptcy and debt advice. For more information, articles, news, tools and valuable resources on bankruptcy and debt solutions, visit this site: Bankruptcy Attorneys

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