Personal Bankruptcy: An Extremely Stressful Consideration

In the majority of cases, merely seriously considering personal bankruptcy is enough to scare someone so much that they will panic and be reluctant to carefully examine their financial problems. Regrettably, statistics indicate that approximately five people out of every thousand have found themselves filing for personal bankruptcy and still more distressing, this figure is going up. Additionally, studies from research agencies indicate that the fundamental reason that people are filing for personal bankruptcy is because of excessive spending which causes extreme debt. If these same people then get the financial burden of unplanned and unanticipated circumstances this can throw their budgets into complete disarray.

There are many grounds why an individual might file for bankruptcy. Losing a job or paying for divorce proceedings are all too common as is the death of a spouse. All have the potential to spell disaster for your money and budget. The average individual that chooses to file for bankruptcy is normally someone who has graduated from high school, is a blue collar worker, and is also the head of the household, even though they are probably in the category of lower middle income. At the same time this person is also going to have extended their finances too far and probably depended heavily on credit in the past.

Laws presently are in place that work to protect both the creditor and debtor and these laws are in place to ensure that those individuals who are honest suffer minimally due to their financial mismanagement. The same laws also offer protection to the creditor and helps them to recover any money owing to them.

If you are looking at filing for personal bankruptcy there are two alternatives open to you. The first is that you can choose 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 dispersed amongst your creditors to fulfill the debt they are owed.

Chapter 13 bankruptcy is a slightly softer choice in that it does not require any elimination of your assets. It does nevertheless require you to reorganize your financial obligations in such a way that you are able to make debt payments over a timescale of between three and five years.

One of the things that many individuals do not consider, however, is that the choice of which chapter to file is not their choice. This is a decision of the courts, who will make that decision after a careful review of your detailed financial information. It is for this reason that a bankruptcy lawyer is strongly recommended so your data can be shown in the right light.

But, concern exists within numerous financial analysts who regard personal bankruptcy as a real threat to the wellness of the economy and there is just reason for this. The number of people who file for personal bankruptcy is rising which in turn causes a distressing trend. In turn this has led to some drastic measures being taken.

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