How Bankruptcy May Actually Help You Get Back On Your Feet

For many of us, the word "bankruptcy," immediately evokes a room-full of guys in fancy ties

, running around, screaming "I am ruined!" and jumping from the Empire State Building. And, even though you have nothing to do with those guys, you also feel like screaming your lungs out because your minimum monthly payments are eating up a good portion of your paycheck, your credit is maxed out and your credit card applications get declined because your credit rating had fell crashing through the floor and stayed there forever.

Speaking of that salary - what's the point of keeping your job, if all your earnings goes to pay the interest on that debt of yours? But, you can't quit - if you do, you won't have anything to stave off those threatening phone calls. You've already heard how these collection phone calls sound like - like that time your car needed some repair work and that other time, when your dog needed a surgery - you're still receiving veterinary bills for that - bills that you can't pay. The dog is now fine - but, veterinarian has learned your phone number by heart after all those collection calls. Throw your student loans into the mix and you seriously begin to contemplate changing your name and moving to Ecuador.

Bankruptcy might actually offer you an escape from that ferry-wheel of interest rates and monthly payments. There are different ways to go bankrupt - but the one you will grow to love is called "Chapter 7." In a Chapter 7 Bankruptcy, two important things happen. Number one: your debt gets discharged. Number two (a.k.a. the "other side of the coin"): everything that you own gets taken away and sold to pay back your creditors. That other side of the coin might sound pretty harsh, but fortunately, the law contains many, many exceptions to that rule - all these exceptions basically ensure that no one will take your personal possessions and sometimes even your car and your house. But - your collection of modern art, your villa in Tuscany and your slave army of French chefs will be confiscated. What was that? You don't possess even a single piece of modern art? What a shame! But, on the other hand, now you won't have to worry about your belongings getting taken away.

Once your bankruptcy petition is filled out and filed in court, you will have to go for a hearing in front of a bankruptcy trustee, who decides whether to grant you a debt discharge or not. The trustee wants to ascertain that you are not hiding a stash of gold coins or a "Mona Lisa", because if you are - he will want it for your creditors. If he sees that you have nothing of the sort, he will order all your debt discharged. Well, almost all of it - some debt, like student loans, for example, will stay with you practically forever. But, most debt, such as credit card bills, car leases, medical bills, and home loans will be erased. The discharge order doesn't becomes final right away - if, say, you win the lottery during the next few months, the trustee will want his share.

Now you can finally take those cooking classes you've always wanted to take, start saving and even build up your credit. You'll be surprised - credit card companies like a person coming out of bankruptcy much more than a person who's never declared Chapter 7, but has a lot of debt. The reason: you can only declare Chapter 7 Bankruptcy once every 10 years. So, don't fall into the credit card companies' trap again - remember, you won't be able to get rid of your new mountain of debt for quite a while. And, it does feel better without those monthly payments, doesn't it?

by: Yasha Spektor

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