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Bankruptcy Information For People In Debt

It is important to have accurate bankruptcy information if you are in a lot of debt. Bankruptcy can often be a way of extracting yourself from debts that are impossible to pay off. Therefore, it is important to know when you can declare bankruptcy and what are the consequences of doing that. Will you still be able to hold a checking account? Could you be fired from your job for being bankrupt?

What Is Bankruptcy?

If a person is not able to pay their debts even by selling all of their property, they may be declared bankrupt. Originally, the state of bankruptcy was set up as a way for creditors to get access to the property of people who were not paying their debts. If the value of the property did not cover all of the debts that the person owed, they were declared bankrupt. Then they would be sent to jail until their families raised all of the money to pay off the debts and have them released.

These days there is no jail sentence for bankruptcy and the debts do not have to be paid in full. A person or business that is bankrupt will have to declare all of their money and valuable property (assets). Depending on the type of bankruptcy, personal possessions such as jewelry and cars may have to be sold. Most people with consumer debt in the USA file for bankruptcy under Chapter 7, which requires most personal possessions to be surrendered but then wipes out all debts except for a few such as child support, student loans and some taxes.

Creditors will receive a percentage of the debt depending on how much money there is: for example, they may all receive 50% of what they are owed. Then the debts are considered wiped out.

For this reason, in modern times it is often the person in debt who chooses to become bankrupt. Creditors such as banks will do all they can to avoid pushing a person into bankruptcy, because they know that if that happens they will never be repaid in full.

What It Means To Be Bankrupt

There are certain penalties associated with being bankrupt. For example, you will find it hard to get credit for a long time. The fact that you filed for bankruptcy will be on your credit report for 10 years and it will take many years for your credit score to recover. However, anybody who is in that much debt probably has a pretty low credit rating already.

There is no law that says you cannot have a checking account after bankruptcy, but some banks will refuse you. Not all banks look at credit reports before approving checking accounts so if you are turned down by one bank, try another.

Except in rare cases, your company probably could not fire you for bankruptcy. Being bankrupt does not have as many consequences these days as it did in the past. Employers and government agencies are not allowed to discriminate against somebody who has filed for bankruptcy.

In the past, bankruptcy was seen as a big disgrace and it was rare for people to declare bankruptcy voluntarily. Those were days when credit was hard to get for the average person. Most people would not owe more than their property was worth, simply because banks would not lend them more. So in most cases a debt could be paid by selling the property. Somebody who had gotten into more debt than they could raise, was not well regarded in the community.

These days bankruptcy is more common and people generally feel less ashamed of it. This is probably partly because of the impersonal nature of modern business. A hundred years ago, people often knew their bank manager socially and if they owed money to the bank, they felt that they owed it to that person. It is not good to feel that you cannot pay your debts to your friends.

But these days when we take out a loan we are usually applying by telephone or online. We never see the person that we are dealing with, who may be in another state or even in a call center in another country. In this situation, we do not feel so bad about not being able to make good on our promises. So these days, more and more people are seeking bankruptcy information and declaring bankruptcy just to get them out of unwanted debts.




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