Uninformed individuals usually cringe when hearing the term Bankruptcy. The mere thought of going bankrupt is something that conjures up thoughts of embarrassment and fear. Overall, people feel that they are a financial failure. They just wonder how they could have been so financially irresponsible. Feelings of guilt start to dominate the persons mind as they beat themselves up over and over again.
Often, people get down on themselves. They feel it is their fault for their poor financial situation. They wonder what they could have done differently. The main question that keeps coming up in their mind is: How could this possibly have happened to me?
Generally speaking, people are not proud of the fact that they may have to undergo the Bankruptcy process. Bankruptcy thus becomes a deep dark secret and they try to hide it from others. The person usually wrestles with an overwhelming feeling of guilt.
The feeling of guilt is something people should not blame themselves for because it is basically not their fault. Fortunately or unfortunately, depending on how a person looks at it, there is an army of sophisticated experts who pray on the public. Their mission is to get the average person to feel the need to buy whatever it is they (the advertisers) are selling.
In the American scheme of things, life is subject to the constant exposure of advertisers who convince us that we absolutely must have what they sell. Their job is to convince us that we can’t live without their products.
Generally speaking, a country’s economy is based on consumer spending. Thus, without consumer spending an economy will slowly grind to a stop. We all would suffer if that were to happen.
The advertisers message is cleverly and seductively presented to the consumer on a daily basis. The daily bombarding of advertising messages on consumers is a sort of brainwashing to generate more consumer spending. Americans are taught from a young age that it is good to keep buying and that it is ok to owe.
The money to continue spending is often provided by a credit system that makes insanely huge profits. Creditors keep lending money even though they know they will sometimes not be repaid. They are still making huge profits overall from the money they lend. They fully expect a certain number of consumer default losses which they basically consider a cost of doing business.
How does Bankruptcy come to the rescue in our system of marketing and the economics of consumer spending? What can the Bankruptcy system do for the brainwashed consumers who are basically the victims of it all? Well, Bankruptcy helps and changes the whole outlook on debt, default and the economics of a market economy.
Initially, Bankruptcy changes the way we look at the debtor or consumer who has fallen on hard times. Indeed, the Bankruptcy system looks to forgive instead of punish. In doing so, the system can return the defaulted consumer to the ranks of the competent consumer. Basically, this gives the defaulted consumer a fresh start. The fresh start is considered one of the main benefits of filing Bankruptcy.
The benefits of Bankruptcy are many and should be considered an overall blessing. However, there are some negative issues to examine when considering Bankruptcy.
In looking at the Pros and Cons of Bankruptcy, one must remember that nothing is perfect. Overall, there are negatives to consider, however the positives surely outweigh the negatives.
The Bankruptcy system for personal debtors basically revolves around two types of filings. Each one is separated into different Chapters in Bankruptcy Law.
Chapter 7 and Chapter 13 are the two Chapters that deal with personal Bankruptcy. They each have their Pros and Cons. However, each benefits the personal bankruptcy filer in unique ways. Lets examine each personal Bankruptcy Chapter for a basic review to see what each Chapter does for the personal consumer.
Filing Chapter 7 Bankruptcy is for individuals who have debt but without a lot of secured assets. What is a secured asset? Well, simply, a secured asset is an asset that is not secured by something. The best examples of this are a home or car. Each, when purchased uses the underlying asset (the home or car being purchased) to secure the debt that is borrowed. In other words, the debtor or purchaser of a loan to buy one of these secured assets, pledges the asset itself in case they default and can’t pay back the loan.
Filing Chapter 7 does have some tools that can allow the debtor to protect some secured assets. However, generally speaking, the Filing of a Chapter 7 Bankruptcy Petition is for debtors who have little to no secured debts.
Filing Chapter 13 Bankruptcy is different because it can easily protect the debtor’s secured assets from creditors. What does that mean? Simply, the debtor’s secured assets can be fully protected from being repossessed by the lender. Thus, a Chapter 13 Bankruptcy Petition can and will protect secured assets of the debtor.
The debtor can save their secured assets like their home or car from repossession if they chose to. Homeowners typically file a Chapter 13 Bankruptcy when they are trying to stop a foreclosure on their home. In addition, for those debtors who stand to get their car repossessed, the Chapter 13 Bankruptcy Petition can stop that also.
Basically, a Chapter 13 allows debtors to catch up on the payments that they missed and get current. As long as the debtor has enough income to pay their current and back payments, they should be successful. Indeed, the major part of filing a Chapter 13 is creating a payment plan. The rules controlling Chapter 13 will dictate if the payment plan is for 3 or 5 years.
What Chapter 13 is mainly interested in is if the individual has a regular income. The income however, has to be enough to cover their regular expenses and still be able to pay on their secured and unsecured debts. Again, as in the Filing of a Chapter 7 Bankruptcy Petition, the Chapter 13 Petition has certain tools built within it.
These tools allow the debtor to protect their secured assets if all other issues in the petition qualify. The major ones being if the debtor is regularly employed and that they have enough to cover their current expenses while catching up on past due debt.
In looking at the Pros and Cons of Bankruptcy, one has to see that Bankruptcy can be a true blessing. The Bankruptcy system is built on a theme of Forgiveness and not Punishment. As long as an individual qualifies, they can truly become debt free.
The debtor can enjoy the Fresh Start that the Bankruptcy System was intended to provide. Sure, the record will stay on the debtor’s credit report for a certain time, which is unavoidable. However, the great burden of debt will be removed.
The debtor will return to a position of financial strength and build up their credit rating again. The debtor will be able to go forward and hopefully never have the burden of unmanageable debts again.