Most Common Reasons For Filing Bankruptcy
Author: Legal Helpers

One of the most debilitating things someone can go through is
filing for bankruptcy. No one thinks this possible could happen
to them until reality sets in and bankruptcy is the last resort.
This usually happens when someone is unable to keep up with
their financial obligations such as car loans or credit card
payments. Not only is it rough on the debtor (or the person who
owes the money) but it is hard on the creditor as well (the
person, business or municipality to which the money is owed).

While it is usually the debtor who files for bankruptcy, there
are the rare occasions when the creditor might do so. This is
called involuntary bankruptcy and generally occurs when the
creditor is owed a very large sum of money. Creditors have
little comfort when trying to collect debts, and therefore are
somewhat relieved when someone files for bankruptcy because, no
matter how long it might take, they will get their money back.

When someone files for Chapter 7 bankruptcy, their assets are
combined and then doled out to the creditors. This form of
"instant gratification" is most favored by creditors since they
get their money up front. However, when the debtor files for
Chapter 13, the creditors are receiving money on a fixed payment
schedule. It may take longer to collect what is owed, but they
will get the money. In these cases, bankruptcy creditors are
almost like loan sharks; they are always trying to get their
money. On the other hand, bankruptcy is frowned down upon by
creditors because they are afraid they will never get paid.

The Chapter 7 bankruptcy process is the easiest of all such
processes. It's often referred to as straight bankruptcy.
Chapter 7 is a total liquidation process. The debtor will turn
over all non-exempt property to the trustee who then will
convert it to cash for distribution to the creditors. The debtor
will receive a discharge on all debts usually within 4 months.
In the vast majority of these cases the debtor has no assets
that he would lose so Chapter 7 will give that person a
relatively new fresh start at life again.

The following reasons are the most common for filing
bankruptcy:

· Unemployment
· Large medical expenses
· Seriously overextended credit
· Marital problems

A recent academic study reported that medical bills caused half
of bankruptcies in the United States.

Chapter 7 will erase all but the following debts for a person
proceeding through this process:

· Child support and alimony
· Personal injury
· Student Loans
· Income tax debt.

There has been much recent controversy surrounding the new
bankruptcy laws, and especially the means test. The simple truth
is that there are more requirements under the new laws and the
unfortunate result of some people required filing chapter 13
instead of Chapter 7. However, for the vast majority of filers
Chapter 7 is still be available with actually little extra
effort. A qualified and experienced bankruptcy attorney will be
able to assist a person through the Chapter 7 filing process and
all the other tests and requirements in the new bankruptcy law.


About The Author: Legal Helpers (http://www.legalhelpers.com)
is a debt relief agency helping people to file for bankruptcy
relief under the bankruptcy code. We're one of the largest
consumer bankruptcy firms in America offering great service and
free consultations. Bankruptcy attorneys answer the phones six
days a week.