rewrite the work

RUNNING HEAD: PERSONAL BANKRUPTY 1

PERSONAL BANKRUPTCY 4

TITLE

Personal Bankruptcy

NAME:

COURSE:

INSTRUCTOR:

INSTITUTION:

DATE:

Abstract

Personal bankruptcy is a legal procedure for people whose circumstances are unlikely to change and who have no hope of paying off their debts within a reasonable time. This paper explains the factors one should consider when assessing the choices related to declaring personal bankruptcy and why personal bankruptcy should be the choice of last resort. Virtually every country with a modern legal system features some form of debt relief for individuals.

In the United States, the same chapters of the Bankruptcy Code are applied in both personal and corporate bankruptcies. Most individuals who enter bankruptcy do so under Chapter 13 (According to the U.S. Bankruptcy Code, to file Chapter 13, you cannot have more than $922,975 in secured debt and $307,675 in unsecured debt.) or Chapter 7 (a "liquidation" of debtor's assets). More rarely, personal bankruptcy proceedings are carried out under Chapter 11. The ultimate goal of personal bankruptcy, from the viewpoint of the debtor, is receiving a discharge (Niemi-Kiesiläine et al., 2003)

This paper outlines how bankruptcy is not something any individual should dream of because it can cost his/her job or even all your assets.

Factors to consider when assessing the choices of declaring personal bankruptcy

Announcing personal bankruptcy is a not easy pronouncement. Bankruptcy will leave a spot on your recognition in for long time. Based on your monetary situation, May consequence in the defeat of your automobile, home and investments. Personal bankruptcy should only be signed as the last option, for those who are in money owing so bottomless they will never be capable to return it back (Griffin, 1994, P. 24).

The only case of personal bankruptcy to be declared is when you consider that no any available sources of income would work longer. Otherwise it is not a good deal. Excessive debt is a major source of stress. No individual want to be bankrupt but people find themselves in this situation. Debt collectors can sue you, and a creditor that wins a lawsuit will have a judgment against you. Some states allow judgment owners to garnish your wages and seize funds in your bank account. The factors you should consider when assessing the choices related to declaring personal bankruptcy:

What are your alternatives to bankruptcy: If there is anything you can do aside from declaring bankruptcy then it’s better to consider it. If you have no assets, and if your income is from social assistance, disability, pensions, sources that cannot be garnisheed, your creditors may not be able to do anything to you and bankruptcy may be unnecessary. (Caher et al., 2013). If your debts are small, if your cash flow and credit are good, or you have equity in your home, you may be able to borrow enough money to pay all of your debts, and have one, lower payment. A debt consolidation loan, Credit counseling and a debt management plan & A consumer proposal to creditors 

Bankruptcy is not a cure all for all your financial problems. If the cause of your debts is overspending, bankruptcy will not solve that underlying issue. You are required as part of the bankruptcy process to complete two mandatory credit and debt counseling sessions.  The good news is you will learn beneficial skills in these sessions about budgeting and money management that can help you stay out of debt in the future.

Do you have any sizeable assets?  While there are exemptions that allow you to keep assets like most household furnishings, clothing and a car. If you have significant equity in your home (beyond the seizure limits set by exemption laws) or investments, bankruptcy may not be your best option. Also, if your income is relatively good, you may need to know about surplus income. (Clancy et al., 2007).

Bankruptcy provides an automatic stay.  When you file bankruptcy your creditors are notified and all actions against you stop.  This includes wage garnishments, lawsuits and collection proceedings.

Bankruptcy deals with all of your unsecured debts, with a few exceptions. That means you can eliminate not only credit card debt but payday loans, tax debts, lines of credit, and unpaid bills. Upon your discharge, your debts are eliminated.

Why personal bankruptcy should be the choice of last resort?

Personal bankruptcy should the very last thing to be in because is very hard on your credit history (basically resets your credit history to zero when completed), May require you to surrender some possessions to your trustee and requires you to keep detailed records of your income and expenses while you remain bankrupt .Although bankruptcy adversely affects a person’s credit rating, most people going into bankruptcy have such a bad credit rating that nothing will make it worse. Personal bankruptcy is a powerful vehicle for a debtor to get a fresh financial start .A lot of people believes that if they fall behind on their debts, bankruptcy is the quickest way out but in reality it’s an awful experience.

There are two types of personal bankruptcy – Chapter 7 and Chapter 13. Chapter 7 is total liquidation where all of your possessions are sold to help pay off the debt. Chapter 13 is used to help restructure the debts so that the debtor can work towards paying them off over the course of several years. Local laws will affect how each type of bankruptcy is administered and what is protected but the basics are the same everywhere.

Bankruptcy is bad because Chapter 7 and Chapter 13 bankruptcy is recorded on your credit report for ten years. For ten years you’re going to have to deal with explaining why you went into bankruptcy and for ten years it’ll be difficult for you to get a loan. They will also insure a loan for someone one year after a Chapter 13 bankruptcy as long as they have stayed current on the plan payments.

Where your credit is used, like by landlords or employer it’s difficult to prove bankruptcy discrimination. Bankruptcy won’t solve all your problems and the people who go that route often have no other choice (which is why so many people report having higher credit scores after declaring bankruptcy). The best advice is to never let yourself get in this situation in the first place, but if you are, you should be aware of what’s in store for you.

References:

Clancy, N., & Carroll, S. J. (2007). Identifying fraud, abuse, and error in personal

bankruptcy filings.Santa Monica, CA: RAND Corp.

Caher, J. P., & Caher, J. M. (2013). Personal bankruptcy laws for dummies. Hoboken,

N.J: John Wiley & Sons.

Griffin, A. (1994). Personal bankruptcy: What you should know. New York:

Cakewalk Press.

Johanna Niemi-Kiesiläinen; Iain Ramsay; William C. Whitford (1 January 2003),

Consumer Bankruptcy in Global Perspective , ISBN   978-1-84113-358-4