How Bankruptcy May Actually Help You Get Back On Your Feet PDF Print E-mail
Written by Yasha Spektor   
Tuesday, 15 June 2010 16:52
The word "bankruptcy" evokes a grim smoke-filled room full of of men in dark suits wailing "I am ruined!" and throwing themselves out of the ornate windows onto the pavement below. Sometimes you feel like one of those guys - you may not have lost your billion-dollar fortune on a Stock Market, but your credit card debt is well into six digits, your credit rating is non-existent and you can't do anything about it because your salary doesn't grow by 20% a month - but your credit card balances do.
by YashaSpektor


The word "bankruptcy" evokes a grim smoke-filled room full of of men in dark suits wailing "I am ruined!" and throwing themselves out of the ornate windows onto the pavement below. Sometimes you feel like one of those guys - you may not have lost your billion-dollar fortune on a Stock Market, but your credit card debt is well into six digits, your credit rating is non-existent and you can't do anything about it because your salary doesn't grow by 20% a month - but your credit card balances do.

Your salary might be enough to live on, but not with the regular payments to the credit card companies. What's the point of having a job, if you don't see any of that big salary of yours? But you are afraid to quit because your salary is the only thing between you and those nasty phone calls from the collection agencies. Like those couple of times you had to postpone paying - one time because of that impulse buy of a huge flat-screen TV and the other time, right after that skiing trip - you still owe the hospital for that one - and it's more than you can ever pay. The hospital's collections people still call you sometimes, hoping to eke out a few bucks. Add to all that your student loans - and running away to hide in the Amazon jungle suddenly sounds like a great idea.

Now - that's what the bankruptcy is for - to give you a breather from the endless vicious cycle of interest rates and monthly payments. There are a few different types of bankruptcy, but the one you would benefit the most from is called "Chapter 7." In a Chapter 7 Bankruptcy, your debt gets discharged, but your assets get taken away and sold to pay back your creditors. Fortunately, the law provides for exceptions to that rule - you'll get to keep all your furniture, clothes, a TV, your laptop, etc. - up to certain value. Your "Mona Lisa" and your yacht with a private jet would be taken, however. What, you don't have a private jet? Exactly! If you are like most people in dire financial straights, you'll get to keep your belongings, but your debt will go away.

Once all the paperwork is prepared and submitted, you will be scheduled for a hearing before a bankruptcy trustee. The trustee will make sure that you are not hiding a stash of gold coins, and if he is satisfied, will issue an order discharging you of all your debt. Well, almost all of it - some debt, like student loans, for example, is not dischargeable. But, credit cards, hospital bills, auto loans and mortgages are. The order discharging you of your debt becomes final in a few months - unless, during that period, you'd manage to win a lottery or receive a large inheritance.

Now you can finally take those motorcycling course you've always wanted to take, start saving and even get new credit cards! It's funny, but credit card companies like someone fresh out of a bankruptcy much more than someone with a lot of debt who hasn't declared one yet. It's simple - one can only declare Chapter 7 Bankruptcy once every 10 years and credit cards know that. So, while saving up is definitely a great idea, I can't say the same about getting new credit cards - remember, once you max them out, you won't be able to get rid of your new debt for quite a while. And, it does feel better without those monthly payments, doesn't it?

DISCLAIMER: This article is provided as information only and is not to be taken as financial advice.

If you live in New York or New Jersey and are thinking to declare bankruptcy, I might be able to help - our law office helped hundreds of people discharge their debt. Once your debt is discharged and you are ready to start anew, read how to make money in this hilarious guide - GetRichandQuick.com.