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What do you know about bankruptcy?

Sometimes the things you do not know can hurt you. What is your bankruptcy IQ? Read on for some information that may help increase your understanding of bankruptcy.

Bankruptcy isn’t something you like to think about, but you may find yourself considering it at some point in your life. How do know if it’s the right thing for you?

Let’s start with information on what it is. Bankruptcy is a federal court process that helps individuals and businesses repay their debts under the protection of the bankruptcy court (Chapter 13 Bankruptcy) or wipe their debts out altogether (Chapter 7 Bankruptcy). When you file for bankruptcy, an automatic stay goes into effect which prohibits your creditors from taking action to collect the debt without the approval of the court.

That seems simple enough. You may have noticed that two types were mentioned. These are the two basic types; liquidation and reorganization. In the US, liquidation is known as Chapter 7 Bankruptcy, which refers to the chapter of the bankruptcy law that allows your assets to be sold off (liquidated) to pay creditors.

Reorganization is most commonly known as Chapter 13 Bankruptcy. Although reorganization bankruptcies fall under Chapter 11, 12 or 13; Chapter 13 applies to most individuals

In any reorganization bankruptcy, you file a repayment proposal with the bankruptcy court. Some debts must be repaid in full, some are repaid as a percentage of the original debt, and others aren’t repaid at all. Payment plans usually cover three to five years.

There are some debts that cannot be discharged or “forgiven”. These include:

  • Debts you forget to list in your bankruptcy papers

  • Child support and alimony

  • Debts for personal injury or death caused by driving while intoxicated

  • Most student loans

  • Fines and penalties imposed for breaking the law, such as traffic tickets and criminal restitution

  • Most tax debts

  • During the repayment period, the court will place restrictions on how you can spend money. In many cases, a set amount will be garnished from your wages and a trustee of the court will make the payments to your creditors.

    If you stick with the repayment plan until the end, you may find that creditors will grant you credit at the end of the repayment period, even though the bankruptcy will stay on your credit history for six years.

    In a liquidation bankruptcy (Chapter 7), you turn your personal property, with a few exceptions, over to the court. The court then sells it and uses the proceeds to pay your debts or some portion of your debts depending on how much was received. Creditors can no longer come after you for payment, but the bankruptcy stays on your credit history for 10 years and you may be denied credit during that period.

    You may have also heard that in 2005 new bankruptcy laws were passed. Per the new bankruptcy law your income must be below the median income for the same size family in your state or you will be required to go through a bankruptcy means test, which places severe restrictions on your spending. For instance, you will be allowed approximately $200 a month for food and less than $800 a month for housing and utilities. If the court believes that you have $100 or more per month in disposable income that you could apply towards your debt repayment, you’ll be pushed into a repayment plan under Chapter 13 instead of qualifying for Chapter 7.

    Filing for bankruptcy has serious consequences and should not be entered into lightly. Having your debts erased doesn’t miraculously solve your long-term financial problems if you continue irresponsible spending habits. However it is sometimes the only way out of a crushing financial burden caused by job loss, medical bills, or other circumstances that are out of your control.

    The number of bankruptcies continues to rise each year. Another number that increases yearly in the US is the amount of unclaimed money. The US is holding billions of dollar in unclaimed property and money. This lost money can become found money. Perhaps enough could be found to get you out of a bankruptcy. Do a free search at www.CashUclaimed.com and find out, it is very simple and comprehensive.


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    When you perform a free trial search on CashUnclaimed.com we display the total dollar amount in unclaimed funds that we show reported by the appropriate government agencies. This does not guarantee that this money is 100% absolutely yours. What it means is that there is that total dollar amount shown by government agencies under your name and common variations of your name at the last time we had the information available to us was reported as unclaimed and is able to have a claim form submitted to be paid that amount. For more information please read our terms of use by clicking the link above.