A Brief Explanation of Bankruptcy And A List Of DONT\’S Part 1
March 5, 2010 by Mallory McGuinness-Hickey
Filed under Uncategorized
Filing for bankruptcy is a no small matter. The most extreme of all financial makeovers, financial analysts continue to warn us that it should be used as a last resort and that bankruptcy shouldn\’t be entered into without knowing what you are doing.
Bankruptcy is stamped onto your credit report for a full ten years. And without a decent credit report, your ability to obtain a car, living situation or employment could be greatly hindered. If you are filing, do your best to plan for your bankruptcy.
In the U.S., there are five chapters of bankruptcy that you can file for. The most common form is Chapter 7. A trustee will collect non-exempt property and will sell it and distribute the proceeds to the creditors. Chapter nine is a bankruptcy that is only available to municipalities. It\’s pretty much a form of reorganization, not liquidation.
Chapter eleven, twelve, and thirteen are more complex and they involve letting the debtor keep some or all of her property while they use future earnings to pay off the debt. Most consumers file chapter seven or chapter 13. Chapter 11 filings are mostly for businesses, individuals are allowed, but are rare. Chapter twelve is similar to Chapter 13 but is only available to \”family farmers\” and \”family fisherman\” in certain situations.
Now for the list of bankruptcy DON\’Ts.
First off, don\’t use your credit cards once you\’ve made this decision. It\’s just a bad idea to incur even more debt that you don\’t intent to repay. It makes you look suspicious, and you could lose your right to cancel out the debt in the bankruptcy. Thing is, there were bankruptcy reforms in 2005 that lowers the threshold on so called luxury purchases to five hundred dollars and extended the abuse period to ninety days before filing. Anything you buy in this period will be under extra scrutiny.
Mallory McGuinness works for a debt collection company. Also she composes articles on business and finance, consumer spending and collection agencies. This and other unique content \’state collection agency\’ articles are available with free reprint rights.