Bankruptcy - What You Should Know
Michalis 'BIG Mike' Kotzakolios
Kotzakoliou, SSA

Bankruptcy filings have spun out of control and consumers are being targeted with easy credit, credit cards and loans. This has helped cause hundreds of thousands of people to file bankruptcy.

What Is Bankruptcy?

One of the most common types of bankruptcy is Chapter 7. In this case you have to liquidate most of your assets to pay off your creditors. The amount that is not paid, is then written off as a loss in regards to your creditors. The trustee of the bankruptcy will collect all of your assets and then proceed to sell them. The profits are then dispensed among the creditors. The other Chapters of bankruptcy involve restructuring of your loans. In most situations you can keep working and use your income to pay your debts when you file bankruptcy with the other Chapters.

New Bankruptcy Law

There is a new bankruptcy law that has been passed called the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Americans that are struggling with debt are now faced with a tough new law. The effect of the new bankruptcy law will give the credit card banks about $5 billion to their bottom line. Don't think bankruptcy is an easy way out. Before the new bankruptcy law, bankruptcy was an easy way out of debt. Too many people took the easy road and now this tough new bankruptcy law will make it much more difficult for the people who really need help.

All Your Debts Are Not Erased With Bankruptcy

Some people file bankruptcy and think all of their debts will be erased with a simple process. This is not true. You can still be responsible for alimony, child support, student loans and other debts. There is no guarantee all your debts will be cleared with a bankruptcy.

Your Credit Challenge For 10 Years

Yes, a bankruptcy will stay on your credit report for up to 10 years. Some bankruptcy lawyers will tell clients a bankruptcy can improve you credit after a couple of years. The fact is, bankruptcy is one of the most damaging things to do to your credit rating. It can be a long tough road to improving your credit after bankruptcy. It's wise to look into all your options before filling bankruptcy. Bankruptcy is a decision that will stay with you long after you file for bankruptcy protection. There are plenty of resources, tools and information online that can help prevent bankruptcy. Take time to look at all the alternatives you have available.