What Is Personal Bankruptcy?

Chapter 7 bankruptcy filings, along with Chapter 13 filings

, totaled over 1.5 million in the US in 2010. This statistic is up over 9 percent from the year before and at this years current rate, totaling 130,000 plus in April and 150,000 plus in June, will be even higher. These figures include joint filings which make the actual number of individuals even higher. Why do people file personal bankruptcy when it can affect their credit score for ten years? They have run out of options.

Ralph and his wife live in a charming home and with his salary, as a designer of electronic technology, his $3000.00 per week easily covers their $3000.00 per month mortgage. Ralphs wife can stay home and pursue a career in writing gardening books while taking care of their two boys. They can also pay at least the minimum on a dozen or so charge cards, two car payments, utility bills etc. Then one day his employer loses its government contract and Ralph joins the ranks of the unemployed. His salary is now a $300.00 per week unemployment check. They immediately shift to survival mode until Ralph gets a new job. One year later he is still looking. The collection agencies are calling every night at dinner time about those card balances. The couple has already turned-in one of their leased cars and they are behind on their upside down mortgage. They are struggling. They have cut out every unnecessary luxury and have used up all of their savings and investments.

Ralph calls a bankruptcy lawyer who explains to him that Chapter 7 is his option. He tells Ralph that because he no longer has any tangible or liquid assets, he will get out from under all the credit card debt and have cash again. Ralph since has found a new job but it pays less than half of his old one. His income under Chapter 7 is protected from creditors, as is his house, furniture and one car. It looks like a pathway to freedom and he will finally be able to sleep at night.

Ralph has one concern about a bankruptcy, which he expresses to the lawyer, regarding damage to his credit. The attorney explains that his credit score is already ruined by all the charge offs. He can use the new money he can save to obtain a secured credit card with a bank and, if he pays on time, they will issue him credit and he can begin again. Only this time he must never assume the crest of the wave will never reach the shore.

by: Leonard Simmons

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