The legal definition of bankruptcy is when an individual or entity declares that they are unable to pay creditors (people they owe money to). While bankruptcy has a negative connotation, for many individuals and businesses it allows them to have a fresh start at life or regain some peace of mind.
Bankruptcy for many is the last option before financial ruin. Millions of individuals and businesses in the United States have gone bankrupt and while it can be a traumatic ordeal for many, it is also usually necessary. If you are on the edge of financial ruin, you may want to look into the option of bankruptcy.
There are three major forms of bankruptcy that are popular in the US, they are chapter 7, chapter 11 and 13. Chapter 7 is when many of your non exempt assets are liquidated to pay your creditors. For instance if you have a valuable art collection or highly valuable assets such as jewelry, you may have to liquidate these assets to pay off your creditors. Chapter 11 is mainly geared toward businesses. Usually a business that goes into chapter 11 will restructure its debt, continue to operate its business and liquidate certain assets to pay off creditors.
Chapter 13 is when an individual rehabilitates his or her debt structure. Many times assets are not sold off, especially a home or vehicle, however payments are set up and a specific amount must be repaid to creditors over a period of time. This type of bankruptcy is for individuals that have a steady source of income.
Obviously, going bankrupt is a big deal and requires legal council and a lot of thought on whether or not bankruptcy can have a positive effect on your life. For most individuals, bankruptcy usually takes a few months for the entire process and while court and lawyer fees are usually relatively low, those already stretched will need to come up with about $500 to $2,000 to file and “go bankrupt”.
While bankruptcy gives a person a fresh start, there is a black mark on their credit report. Usually bankruptcy will stay on one’s credit report for up to 10 years. While many people that go bankrupt are eligible to once apply for a credit card, many creditors will definitely think twice before issuing you an unsecured loan or secured loan after going bankrupt.
Copyright 2011: Credit Problem Lenders. High Risk Loans All rights reserved.
