Bankruptcy laws were enacted to enable someone who is in a great deal of debt to be released from personal liability for specific debts. In other words, the consumer is no longer legally required to pay the debts that the court rules as discharged. During the Great Recession, measures were taken to bail out Wall Street, leaving those on Main Street to bear the burden. Every day, we see people facing long-term unemployment, getting underwater in their mortgages, and drowning in debt that they never could have imagined. People continue to lose their homes, their cars, and their way of life.
Thankfully, the Bankruptcy Code is there for times just like these. Bankruptcy is governed by a federal law adopted in 1898 and amended many times, such as with the Bankruptcy Reform Act of 1978 and again in the spring of 2005. In 1934, the Supreme Court wrote about the purpose of the bankruptcy law: “It gives to the honest but unfortunate debtor…a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.” The fundamental goal of the federal bankruptcy laws is to give debtors a financial “fresh start” from burdensome debts. This goal is accomplished through the bankruptcy discharge, which releases consumers from personal liability from specific debts and prohibits creditors from ever taking any action against the consumer to collect those debts.
Once a judge declares a bankruptcy discharged and you are released from debt, you’ll feel relief from harassing creditors and debt collectors. Certain actions from creditors must cease immediately, such as car repossessions, mortgage foreclosures and other lawsuits from creditors or others to whom you owe money. In addition, overdue debts are written off and a third party is put in charge to administer the decision-making process.
It’s possible to wipe the slate clean or to restructure your debt, to get out of your upside-down mortgage, and to keep your creditors at bay. Is bankruptcy a solution for you? Answer the following questions to take the first step in reclaiming your future.
Bankruptcy may or may not be the solution to your financial woes. If, for example, you’re unable to make monthly payments to your creditors and still have enough money to live on, Chapter 7 bankruptcy might be an option. The same may hold true if your sole income is from Social Security or if you have gross annual income of $43,000. However, if you simply need some breathing room to get your financial life straightened out, Chapter 13 bankruptcy might be a better option.
If these terms apply to you, then bankruptcy may be an option to consider.
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Learn more about bankruptcy terms and definitions Read more