Personal Bankruptcy: A Very Stressful Idea

Examining the bulk of filings, merely considering personal bankruptcy is enough to scare someone so much that they might panic and be afraid to carefully examine their financial problems. Regrettably, statistics show that around five people out of every thousand have found themselves filing personal bankruptcy and still more worrying, this figure is on the rise. In addition to this, reports from research agencies show that the fundamental reason that people are filing for personal bankruptcy is because of extreme spending causing extreme debt. If these same consumers then experience the financial burden of unplanned and unanticipated circumstances this can throw their monetary resources into complete disarray.

There are many reasons why a person may file for bankruptcy. Getting laid off from a job or paying for divorce proceedings are common as is the death of a spouse. Any of these have the potential to spell disaster for your finances. The typical individual that chooses to file for bankruptcy is usually someone who successfully graduated from high school, is a blue collar employee, and is also the head of the household, although they are in all probability in the category of lower middle income. At the same time this individual is also going to have stretched their finances too far and will have relied to a great extent on credit in the past.

Laws currently are working today that work to protect both the creditor and debtor and these laws are in place to ensure that those debtors who are honest suffer as little as possible because of their financial mismanagement. The same laws also offer protection to the creditor and helps them to recover any funds they are owed.

If you are looking at filing for personal bankruptcy there are two options available to you. The first is that you can select to file for Chapter 7 bankruptcy. The second option is Chapter 13 bankruptcy and both are substantially different. Chapter 7 bankruptcy requires all of your assets (that are not exempt) to be auctioned off and the proceeds of these assets will be spread amongst your creditors to satisfy the debt owing to them.

Chapter 13 bankruptcy is a more or less softer option in that it does not require any liquidation of your assets. It does nevertheless require you to reorganize your debt load in such a way that you are able to pay off the debts over a timeframe of between three and five years.

One of the aspects that many people do not think of, however, is that the option of which chapter to file is not their decision. This is a decision of the courts, who will give that decision after a careful review of your particular financial data. It is because of this that a bankruptcy lawyer is strongly recommended so your data can be exhibited in the correct light.

But, fear exists amongst numerous financial analysts who regard personal bankruptcy as a serious menace to the health of the economy and there is just grounds for this. The number of people who file for personal bankruptcy is rising which in turn causes a distressing trend. In turn this has prompted some drastic measures being enacted.

Only recently, in March 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was presented and this requires individuals who file for personal bankruptcy to go through a number of tests on the status of their income and to cling to stricter regulations before they are permitted to declare this type of bankruptcy.