What is bankruptcy?

When a person is a financial crisis, burdened with debt, he or she can decide to free him/herself of debt and restart... "a new lease on life".

Bankruptcy after all may not sound that bad since it could give you some peace. But consider as well that it is the worst possible thing that could ever happen to your credit report, the negative remark will stay for about 7 – 10 years. The bankruptcy report will appear in the court file for about 20 years. If you are considering to rent a house, or if you are looking for a job or already have one but you are trying to get a promotion, employers are allowed by Federal Law to consider bankruptcy as a reason to reject a person that has filed bankruptcy in the past. It would be like a phantom in your life that would be impossible to get rid of.

Most of the people who have filed bankruptcy regret to have taken that decision, wish they could had found a different option and that somebody had helped them showing more alternatives.

There are two kinds of personal bankruptcy, Chapter 13 and Chapter 7. An overview of both chapters is that Chapter 13 is a re-organization of one's finances, it provides some peace from having creditors pestering, all properties can be kept but it gives a judge the authority and power to decide how much should be re-paid to the creditors and how. The amount to pay to the creditors could vary between 10% - 90% of the original amount owned. And Chapter 7 you are allowed to keep the “exempt” property (each state has its own policies regarding what can be kept and what needs to be given up) but most of your assets are sold in order to pay off the debts. In either case payments (house, car, most student loans, taxes) just don't disappear.

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