Bankruptcy Offers a Fresh Start

Bankruptcy is an opportunity for individuals to get a fresh financial start. The process involves reducing any excessive assets owned and then settling any debts possible. Then, the individual requests the court to make them bankrupt. When this happens, all previous and included debts are forgiven. The ability to do this is given to US citizens as a right under the US Constitution. However, the process has implications that last for years. Before making the decision to file, consider all aspects of the process and long term implications to determine if this is the right choice for you.

Losing Assets Could Happen

Under bankruptcy law, any assets not protected by specific exemptions become subject to confiscation and sold by the trustee. A trustee represents the creditors in the case and works to liquidate any funds possible from what the individual owns. However, many states have rules in place to protect some types of assets. This may include personal property, one vehicle, tools used for work related tasks and, in some cases, the home up to a certain value.

Protecting Current Loans

Individuals can declare bankruptcy and still keep some loans. For example, those who own a home and are up to date on mortgage payments or who can get up to date on payments through the process can reaffirm the terms of the mortgage with lenders. The same applies to some car loans. During the process, the individual must stay up to date on payments to the lenders of such loans. In doing so, the assets are kept.

Life After

Once the trustee liquidates any possible assets, creditors have the ability to fight the bankruptcy. Most do not since most individuals do not own numerous assets. The court then rules on the case. In most situations, individuals receive forgiveness for all debts listed. In doing so, there is no legal way the creditors can require these individuals to repay the debt previously owed. There are long-term implications including the following:

- Individuals may find it difficult to obtain a new loan from any new creditor.

- A notation of the legal action will remain on the individual's credit report for up to 10 years.

- In some situations, the individual may find prospective employers, insurance providers and others who view the credit report to notice this notation. This could limit the individual's ability to receive these services and benefits from some providers.

In most situations, bankruptcy is a good thing. Individuals who simply cannot repay their debts get a fresh start. In doing so, the individuals are able to catch up financially and start building long-term financial stability. Making the decision to file is not one to make on your own. Discuss your options with an attorney who can answer questions.