Chapter 7 Bankruptcy 101

Thursday, March 17, 2011

The History of Bankruptcy

History of Bankruptcy:

Bankruptcy is written right into the Constitution (Article I, Section 8, Paragraph 4) and therefore, United States Bankruptcy Law has been around for more than 200+ years.
Virtually every industrialized country in the world has the option of filing bankruptcy as a method of financial relief. The earliest mention of bankruptcy is in the Old Testament, Book of Deuteronomy 15:1-2:

“At the end of every seven years you are to cancel the debts of those who owe you money. This is how it is done. Everyone who has lent money to his neighbor is to cancel the debt: he must not try to collect the money: the Lord himself has declared the debt canceled.”

Bankruptcy is the necessary safety valve in the free market system. Without bankruptcy, people that are over their head financially would give up or become part of the underground. Society will benefit by your bankruptcy, as you will be able to become a productive citizen again and spend your money locally. It is not a crime to not pay your bills, you cannot go to jail for failure to pay your bills.
Bankruptcy is Federal Law of the United State of America.

Found at http://www.bankruptcy-info.com/history.php

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Bankruptcy Myths

Myth: People who file bankruptcy can't get credit for 10 years

 Nonsense. Chapter 7 filers get swamped with credit card offers after they get their discharge. This is not credit at the best rates, but credit is available. The myth probably got its start in the fact that the Fair Credit Reporting Act allows the reporting of a bankruptcy filing for 10 years.

Myth: You lose

every-thing you own in bankruptcy  

Not true! Over 95% of bankruptcy cases filed by individuals are "no asset" cases in which the debtor keeps everything he owns. That's because exemptions provide for assets that the debtor can keep and some assets, like pensions, are beyond the reach of bankruptcy trustees and creditors.

Myth: Bankruptcy represents personal or moral failure  

Nonsense! More than 90% of bankruptcy filings are traceable to job loss; illness; or divorce, factors largely out of anyone's control. Bankruptcy is a safety value to prevent individuals from being buried by debts they can never repay.

How It Works:

The most frequent type of bankruptcy is Chapter 7, which is also referred to as a ” “liquidation” bankruptcy, that cancels out your debts. The entire legal process takes about three to six months, and commonly requires only one visit to a hearing. The court proceedings will liquidate any non-exempt belongings of the borrower. Examples of exempt belongings that will avoid liquidation can be a house, car, tools of a business, or a number of approved personal items. Once the non-exempt belongings are liquidated, the amount gained from selling the borrower’s assets are distributed amongst the creditors involved, in order to pay off the debt. After the proceedings, the court frees the borrower of all their dischargeable debts, giving them a fresh financial start.

The Automatic Stay Sometimes referred to as “bankruptcy’s magic wand”, the automatic stay puts into effect an “Order For Relief” upon filing, which immediately puts a stop to most creditors who are trying to collect what you owe them. They cannot garnish your wages, go after your house or car, or cut off your utilities or welfare benefits.

Who Is Eligible:

There are a few pre-requisites for eligibility in a Chapter 7 bankruptcy case. Under the new bankruptcy laws, you must measure your current monthly income over the last six months against the median income of a family your size in your state. If your income is equal or less than the median income, you are eligible to file for a Chapter 7. If your income is over the median, you must pass “the means test”. The purpose of “the means test” is to judge whether you have enough disposable income to repay a portion of your debt over a five-year period. If you have already obtained a discharge of your debts within the last eight years from a Chapter 7, or within six years of a successful Chapter 13 filing, you won’t be able to file for Chapter 7 bankruptcy.

How To File To file for Chapter 7 bankruptcy:

You will need to fill out a number of forms and file them with the bankruptcy court in your area. The forms will ask you to describe your property, income, living expenses, debts, personal property, and money spent and property owned and sold within the last two years. If you are seriously considering bankruptcy and you live in Michigan, and cant afford an expense Bankruptcy Attorney, we can help. While the process appears complicated, AZA Bankruptcy Petitioners will be able to help you understand your options and avoid making bad decisions that you could later regret. If you are over-burdened with bills and cannot see any light at the end of the tunnel, bankruptcy may be the best option to help you get that much needed clean slate and allow you to rebuild your future.