What is United States Bankruptcy?

United States Bankruptcy is a federal legal proceeding that helps people, who are in debt and are not in a position to pay their bills, to start afresh financially by liquidating their assets, or by creating a repayment plan.

A federal court prohibits debt collectors from making any further efforts to recover their debts from the person who has declared bankruptcy, until the debts have been sorted out as per the provisions of federal bankruptcy law.

In bankruptcy law, each of the 94 federal judicial districts handles bankruptcy-related matters, and in most of the districts, bankruptcy cases are filed in the bankruptcy court. These cases cannot be filed in state courts. 

There are many different types of United States Bankruptcy, meant to help people and businesses in different debt situations to get out of debt.

Chapter 7 bankruptcies require a person who owes money to be within a certain asset limit, or to agree to give up property over that limit to be sold by the court. An individual who successfully declares Chapter 7 bankruptcy can get out of debt completely. 

Chapter 11 bankruptcies are meant for people or businesses with very big debts, while Chapter 12 bankruptcies are meant specifically to help farmers get out of debt. Chapter 13 bankruptcies require people who are in debt to pay back at least a part of their debts from their current wages. 

More and more Americans have been filing for bankruptcy in recent months, and one of the reasons for this is the troubles in the sub prime lending industry, which has been experiencing record numbers of foreclosures. 

People get into debt due to a variety of reasons, like unforeseen emergency expenses, gambling, or excessive credit card use, but the bottom line is that they need to get out of debt as soon as possible, in the most sensible way.

It is worth taking time to study the pros and cons of filing for bankruptcy and learn all you can about bankruptcy law before making a decision about the best way to get out of your financial problems. 

Declaring bankruptcy offers several benefits, which include preventing foreclosure on your home, or repossession of personal items like cars, not having to repay most or all of your debts, freedom from wage garnishments/calls made by debt collectors, and preventing disconnection of utilities.

However, declaring bankruptcy will not allow you to stop making payments like alimony, child support, student loans, criminal fines, court restitution orders, or certain taxes. 

If you don’t want to opt for United States bankruptcy, you can explore other options like getting a second job, getting rid of your credit cards or not using them, negotiating new payment terms with your creditors, or selling off some high-value assets to get out of debt in a planned way. 

Debtors have to meet the credit counseling requirement of the law, and to undergo a Credit counseling briefing with an approved counseling agency, before they can file a bank petition. They must also go through a financial counseling session on personal finance before they can get a discharge fro the court. 

Remember that there is life after bankruptcy, and you can rebuild your credit, so you can qualify for near-normal interest rates, a year or two later. A credit counselor can help you to review your situation, and will suggest the best solutions for you.