Causes of Bankruptcy
Fri, 08/15/2008 - 13:20Many people who are just learning more about bankruptcy may be wondering what the main causes are. The truth is that the causes that lead an individual or company to file for bankruptcy may vary widely. In the case of businesses, often they just cannot remain afloat or manage to make a profit to cover their losses. With the changing economy, this can be difficult for even previously successful businesses to maintain. A business can only last so long without making a profit before it will go under. For individuals, the causes that lead one to file for bankruptcy often vary even more greatly.
For individuals who must file for bankruptcy, not all are filing for the same reason. While most people who file for bankruptcy are usually in debt over their heads, the reasons behind that debt may vary quite widely. Some people are in debt because they cannot pay their bills. One of the most common ways to go into debt is to miss a bill and to take out a loan or cash advance to pay that bill. While the bill may be paid, the person will then have to repay the loan or advance plus interest. When the next bill arrives, the cycle may repeat itself. This usually happens until the person is so high in debt that he has no choice but to file for bankruptcy. This cycle can be prevented, but it does take close financial advising and assistance.
People can also get into trouble when they come to depend on their credit cards to pay their bills. The bills may be covered initially, but what happens when the end of the month comes and the people must pay back their credit card bills plus any other balances or interest on the cards? Some people may try to pay off one card with another, which simply results in more trouble. They may continue in this cycle until they, too, are in debt. When situations like these arise, some people may have no other alternative but to file for bankruptcy. In these situations, bankruptcy is usually initiated by the person or business in debt. However, bankruptcy can also be initiated for someone else by a person or business who is owed money.
For individuals who must file for bankruptcy, not all are filing for the same reason. While most people who file for bankruptcy are usually in debt over their heads, the reasons behind that debt may vary quite widely. Some people are in debt because they cannot pay their bills. One of the most common ways to go into debt is to miss a bill and to take out a loan or cash advance to pay that bill. While the bill may be paid, the person will then have to repay the loan or advance plus interest. When the next bill arrives, the cycle may repeat itself. This usually happens until the person is so high in debt that he has no choice but to file for bankruptcy. This cycle can be prevented, but it does take close financial advising and assistance.
People can also get into trouble when they come to depend on their credit cards to pay their bills. The bills may be covered initially, but what happens when the end of the month comes and the people must pay back their credit card bills plus any other balances or interest on the cards? Some people may try to pay off one card with another, which simply results in more trouble. They may continue in this cycle until they, too, are in debt. When situations like these arise, some people may have no other alternative but to file for bankruptcy. In these situations, bankruptcy is usually initiated by the person or business in debt. However, bankruptcy can also be initiated for someone else by a person or business who is owed money.
The Consumer Protection Act
Fri, 08/15/2008 - 13:18Although many people do not ever wish to have to file for bankruptcy, unfortunately some people do take advantage of filing for relief of their debts. These people may file for bankruptcy seeking debt relief before investigating other alternatives, and this can cause a few difficulties and back-ups for those involved in the case. This can also make it potentially more difficult for those people who really need to do so to file. For this reason, people have experienced changes under a new act that has been passed.
The official title of the Act is the Bankruptcy Abuse and Consumer Protection Act. This Act was passed in 2005, with changes going officially into effect in late 2005. The act was passed by several prominent politicians in order to make filing for certain types of bankruptcy more difficult. For example, the Act is intended to make it more difficult for people to be able to file under Chapter 7 bankruptcy, which includes the liquidation of the person or company’s assets. The assets will then be divided and sold among the people or companies to whom the individual or business has debt.
Also, people or businesses who wish to file under Chapter 13 bankruptcy will also have a more difficult time. They may be required to have additional income counseling or to have received this counseling before they are allowed to file. This may prevent unnecessary cases of bankruptcy or may prevent them from happening again. The Act may also limit a person or company’s protection under the chapters as well as make the person’s counsel more liable for his or her client’s proceedings or choices.
While this Act may seem to be somewhat of an impediment, its goal is to make the bankruptcy process a bit more difficult so that people who do not necessarily need to file for bankruptcy will be discouraged from doing so. This may make it easier for people who do need to file to do so while also clearing up the court system for others.
The official title of the Act is the Bankruptcy Abuse and Consumer Protection Act. This Act was passed in 2005, with changes going officially into effect in late 2005. The act was passed by several prominent politicians in order to make filing for certain types of bankruptcy more difficult. For example, the Act is intended to make it more difficult for people to be able to file under Chapter 7 bankruptcy, which includes the liquidation of the person or company’s assets. The assets will then be divided and sold among the people or companies to whom the individual or business has debt.
Also, people or businesses who wish to file under Chapter 13 bankruptcy will also have a more difficult time. They may be required to have additional income counseling or to have received this counseling before they are allowed to file. This may prevent unnecessary cases of bankruptcy or may prevent them from happening again. The Act may also limit a person or company’s protection under the chapters as well as make the person’s counsel more liable for his or her client’s proceedings or choices.
While this Act may seem to be somewhat of an impediment, its goal is to make the bankruptcy process a bit more difficult so that people who do not necessarily need to file for bankruptcy will be discouraged from doing so. This may make it easier for people who do need to file to do so while also clearing up the court system for others.
Bankruptcy in Different Countries
Fri, 08/15/2008 - 13:16While bankruptcy is certainly not the most desirable position to declare, learning about the subject and its process can be fascinating or at least informative. For people who deal with business or finances, learning the differences in bankruptcy between the United Kingdom and the United States, for example, can be very helpful and sometimes vital. This also goes for lawyers, who may one day have to deal with a bankruptcy case or who may even make this type of law their specialty.
The History of Bankruptcy
Fri, 08/15/2008 - 13:13Most people dread the word bankruptcy, and they do not even want to think about what would happen should they have to file for bankruptcy. But the word itself does have a fascinating history that many people would find interesting. Even for people who are not in a financially binding situation, studying more about bankruptcy and its origins can be an interesting task. Learning about bankruptcy can also prove useful should the need to know more detailed information ever arise.
The actual origin of the word bankruptcy comes from the Latin. There are two separate words that have different meanings in Latin that when combined together eventually came to make up the word bankruptcy. These words are “bancus,” which means a bench or a table, and “ruptus,” which means broken. It is easy to tell how the two words were combined to make up the modern version of the word bankruptcy. However, there is a rhyme and a reason behind the origin of the word.
In ancient times, some of the first bankers were located in public places, where they conducted their business. These early bankers usually conducted their business at a bench, which they had set up in the public place. If the banker were to fail his customers or if his business was found to be unsound in any way, the banker would be driven out of business or would eventually have to shut down. When the banker was out of business, the bench on which he conducted his dealings would be broken. When the bench was broken, it signified to people in the public place that the banker was no longer good for doing business.
Today, of course, benches are no longer being broken. Instead, the word bankruptcy has been combined from the two ancient Latin words and the broken bench is now signified figuratively by the word bankrupt. When a person or company is bankrupt, they are no longer “good” for doing business, so thus the word actually applies in its full meaning even today. Although having the label of bankrupt is not a desirable goal for anyone, knowing a little history behind the name can make learning about bankruptcy less tedious.
The actual origin of the word bankruptcy comes from the Latin. There are two separate words that have different meanings in Latin that when combined together eventually came to make up the word bankruptcy. These words are “bancus,” which means a bench or a table, and “ruptus,” which means broken. It is easy to tell how the two words were combined to make up the modern version of the word bankruptcy. However, there is a rhyme and a reason behind the origin of the word.
In ancient times, some of the first bankers were located in public places, where they conducted their business. These early bankers usually conducted their business at a bench, which they had set up in the public place. If the banker were to fail his customers or if his business was found to be unsound in any way, the banker would be driven out of business or would eventually have to shut down. When the banker was out of business, the bench on which he conducted his dealings would be broken. When the bench was broken, it signified to people in the public place that the banker was no longer good for doing business.
Today, of course, benches are no longer being broken. Instead, the word bankruptcy has been combined from the two ancient Latin words and the broken bench is now signified figuratively by the word bankrupt. When a person or company is bankrupt, they are no longer “good” for doing business, so thus the word actually applies in its full meaning even today. Although having the label of bankrupt is not a desirable goal for anyone, knowing a little history behind the name can make learning about bankruptcy less tedious.
Bankruptcy For Businesses
Fri, 08/15/2008 - 13:11Having to file for bankruptcy seems to be an entrepreneur’s worst nightmare of a good business idea gone bad. However, even previously successful businesses have had to shut down or file for bankruptcy in past years. This will remain true of most businesses in the world’s ever fluctuating economic market. Even businesses that have been stable for years cannot always depend on a steady financial future. That is why some businesses do have to face up to filing for bankruptcy. A business that files for bankruptcy must follow a different procedure than that for an individual.
The Previous Chapters
When businesses must file for bankruptcy, they now file under Chapter 11 of the Bankruptcy Reform Act of 1978. However, this was not always the case. In previous years, when businesses had to file for bankruptcy, they had to file their case under a certain chapter. This chapter would pertain to that particular type of business, and there were three chapters in total under which a business could file for bankruptcy.
Before chapter 11 was passed under the Bankruptcy Reform Act, companies that were considered big businesses generally filed for bankruptcy under chapter 10. These companies also held public debt and had equity. Companies that were smaller and did not hold any public debt would file for bankruptcy under chapter 11. Finally, companies that had extensive holdings of properties would file for bankruptcy under chapter 12. Of course, the chapters were consolidated into one during later years and are now just referred to as chapter 11 under the new Act. This somewhat simplifies the process for businesses that have to file for bankruptcy.
Certainly, filing for bankruptcy is not the goal of any business. Yet, some businesses have been able to bounce back from hard economic times and have been able to turn a profit once again. Although the changing economy can make running a successful and stable business difficult, it can be done. Bankruptcy is an option to consider, however, for businesses that are in debt. In some cases, a period of relief from debts could potentially allow a business to make a fresh start and to begin rebuilding their credit.
The Previous Chapters
When businesses must file for bankruptcy, they now file under Chapter 11 of the Bankruptcy Reform Act of 1978. However, this was not always the case. In previous years, when businesses had to file for bankruptcy, they had to file their case under a certain chapter. This chapter would pertain to that particular type of business, and there were three chapters in total under which a business could file for bankruptcy.
Before chapter 11 was passed under the Bankruptcy Reform Act, companies that were considered big businesses generally filed for bankruptcy under chapter 10. These companies also held public debt and had equity. Companies that were smaller and did not hold any public debt would file for bankruptcy under chapter 11. Finally, companies that had extensive holdings of properties would file for bankruptcy under chapter 12. Of course, the chapters were consolidated into one during later years and are now just referred to as chapter 11 under the new Act. This somewhat simplifies the process for businesses that have to file for bankruptcy.
Certainly, filing for bankruptcy is not the goal of any business. Yet, some businesses have been able to bounce back from hard economic times and have been able to turn a profit once again. Although the changing economy can make running a successful and stable business difficult, it can be done. Bankruptcy is an option to consider, however, for businesses that are in debt. In some cases, a period of relief from debts could potentially allow a business to make a fresh start and to begin rebuilding their credit.
Individual Bankruptcy
Fri, 08/15/2008 - 13:09Bankruptcy seems like the end of the financial road to most individuals. While this may technically be true, filing for bankruptcy is ideally supposed to help an individual to get back onto his feet. While it is in real life a more complicated process than this, individuals do not have to resign themselves to having no financial future because they had to file for bankruptcy. Learning more about the subject can be very valuable for individuals who find themselves in financial trouble or who simply want to be aware of the subject and the process of bankruptcy.
A Fresh Start
Bankruptcy is in its simplest nature designed to give individuals a fresh start. It does so by relieving debts that people have been unable to pay themselves. Bankruptcy takes a person’s assets and divides them so as to pay the person’s creditors in a timely and organized manner. This enables people ideally to manage their debt in a very organized way and to get back onto their feet. While initiating bankruptcy may be the only alternative for some people who are stuck in an endless cycle of debt, it is not always a person’s saving financial grace.
There are some aspects of finance that are not covered or protected by bankruptcy. Certain taxes and loans –like government guaranteed student loans- are not typically dismissed –or discharged- when a person files for bankruptcy. This means they may not automatically be paid by the person’s assets. Whereas debts are usually considered satisfied after a person files for bankruptcy –even if the person’s total assets didn’t cover the entire debt- this may not always be the case in some situations. Debt that has been “tainted” by acts like embezzlement and other criminal acts may not be covered, either.
People who are considering filing for bankruptcy need to speak with a financial adviser to determine how filing for bankruptcy could help or hinder their situation. It is always better to investigate every option before settling on one. Doing so can save people a great deal of trouble in the long run.
A Fresh Start
Bankruptcy is in its simplest nature designed to give individuals a fresh start. It does so by relieving debts that people have been unable to pay themselves. Bankruptcy takes a person’s assets and divides them so as to pay the person’s creditors in a timely and organized manner. This enables people ideally to manage their debt in a very organized way and to get back onto their feet. While initiating bankruptcy may be the only alternative for some people who are stuck in an endless cycle of debt, it is not always a person’s saving financial grace.
There are some aspects of finance that are not covered or protected by bankruptcy. Certain taxes and loans –like government guaranteed student loans- are not typically dismissed –or discharged- when a person files for bankruptcy. This means they may not automatically be paid by the person’s assets. Whereas debts are usually considered satisfied after a person files for bankruptcy –even if the person’s total assets didn’t cover the entire debt- this may not always be the case in some situations. Debt that has been “tainted” by acts like embezzlement and other criminal acts may not be covered, either.
People who are considering filing for bankruptcy need to speak with a financial adviser to determine how filing for bankruptcy could help or hinder their situation. It is always better to investigate every option before settling on one. Doing so can save people a great deal of trouble in the long run.
What is Debt Consolidation?
Fri, 08/15/2008 - 13:02Since bankruptcy is typically a last resort for most people, there are a few things a person can do to try and avoid having to file for bankruptcy. One of the best things a person can do is to consider debt consolidation. Learning more about debt consolidation can really help a person who may someday struggle financially or who is questioning whether to file for bankruptcy. Often debt consolidation can help many people to get back onto their feet after a tough financial time without having to resort to filing for bankruptcy.
Most people have probably seen the numerous advertisements on television advocating debt consolidation services. While it is true that debt consolidation can generally be helpful, people should be wary of depending on just any debt consolidation service they see on television. A person should consult with a financial adviser or other legal professional before actually using any sort of debt consolidation service to make sure doing so is the best choice for him. However, learning information about debt consolidation can be a valuable tool for people to have.
Basically, debt consolidation is using a loan to repay other debts. This is why choosing the right service is of the utmost importance for people who are already struggling financially. For example, if a person is faced with paying off four credit cards, the loan for debt consolidation would pay off those cards and the person would be left with only one payment. Typically, it is easier for most people to be able to budget one payment instead of four, so it can work well for many people. The payment may also have a lower interest rate than the person’s other debts, which may help to reduce a person’s total monthly payments. Before looking into debt consolidation, a person should consider whether they will qualify, which means the bank or service must be able to prove the person will have the means to repay the loan. This is where looking into advice from a qualified professional can really come in handy.
Most people have probably seen the numerous advertisements on television advocating debt consolidation services. While it is true that debt consolidation can generally be helpful, people should be wary of depending on just any debt consolidation service they see on television. A person should consult with a financial adviser or other legal professional before actually using any sort of debt consolidation service to make sure doing so is the best choice for him. However, learning information about debt consolidation can be a valuable tool for people to have.
Basically, debt consolidation is using a loan to repay other debts. This is why choosing the right service is of the utmost importance for people who are already struggling financially. For example, if a person is faced with paying off four credit cards, the loan for debt consolidation would pay off those cards and the person would be left with only one payment. Typically, it is easier for most people to be able to budget one payment instead of four, so it can work well for many people. The payment may also have a lower interest rate than the person’s other debts, which may help to reduce a person’s total monthly payments. Before looking into debt consolidation, a person should consider whether they will qualify, which means the bank or service must be able to prove the person will have the means to repay the loan. This is where looking into advice from a qualified professional can really come in handy.
What are the Remedies for Bankruptcy?
Fri, 08/15/2008 - 12:57Once a person has filed for bankruptcy, he may be wondering what the next steps are he should take in order to ensure a brighter financial future. The good news is that there are several steps a person can take in order to rebuild his credit and to help on the sometimes bumpy road back from a state of bankruptcy. The process is certainly not a piece of cake – but by following the advice of a financial advisor or other legal professional and exercising good decision making, it is possible for a person to get back on his feet.
Making a New Financial Life
After filing for bankruptcy, a person may not know what to do in order to start rebuilding his finances. Of course, the issue of top concern is to rebuild credit and to establish good credit once more. This can make a person more financially appealing when it comes to applying for anything from a bank loan to purchasing a car. This is why repairing credit should be one of the foremost concerns of a person who has had to file for bankruptcy.
One of the first steps a person should take after filing for bankruptcy and going through the bankruptcy process is to get a copy of his credit report. This can be true of someone who has not had to file for bankruptcy but is facing some difficult financial situations, as well. The person should review the report well or have someone knowledgeable take a look. The person should search for any errors on the report. The next step is to work on repairing any negative information that might show up on the person’s credit report. Paying debts and the creditors is the next step. After a person has paid the creditors, he can ask for the negative information to be removed from his credit report. This can ultimately make him look more appealing financially.
Of course, the next steps after a person has re-established a decent credit report include making wise decisions. These are basic decisions such as paying off bills and debt when they arrive and not waiting until the last minute or using credit cards to do so. Avoid taking out cash advances and begin saving up money. Doing these simple things can help a person to build a brighter financial existence in the long run.
Making a New Financial Life
After filing for bankruptcy, a person may not know what to do in order to start rebuilding his finances. Of course, the issue of top concern is to rebuild credit and to establish good credit once more. This can make a person more financially appealing when it comes to applying for anything from a bank loan to purchasing a car. This is why repairing credit should be one of the foremost concerns of a person who has had to file for bankruptcy.
One of the first steps a person should take after filing for bankruptcy and going through the bankruptcy process is to get a copy of his credit report. This can be true of someone who has not had to file for bankruptcy but is facing some difficult financial situations, as well. The person should review the report well or have someone knowledgeable take a look. The person should search for any errors on the report. The next step is to work on repairing any negative information that might show up on the person’s credit report. Paying debts and the creditors is the next step. After a person has paid the creditors, he can ask for the negative information to be removed from his credit report. This can ultimately make him look more appealing financially.
Of course, the next steps after a person has re-established a decent credit report include making wise decisions. These are basic decisions such as paying off bills and debt when they arrive and not waiting until the last minute or using credit cards to do so. Avoid taking out cash advances and begin saving up money. Doing these simple things can help a person to build a brighter financial existence in the long run.
Bankruptcy Terms
Thu, 08/14/2008 - 17:00Learning about bankruptcy can be a difficult and time consuming task. There are many different concepts to remember as well as points to bankruptcy itself which can sometimes inhibit the learning process. However, taking the time to learn a little more in depth information about bankruptcy can help a person to better understand his finances and how the economic system works. Also, should the need ever arise to file for bankruptcy a person will have a better understanding of how the system works and what lies in store for him.
Some Terms to Learn
Of course, there are hundreds of terms that are pertinent to bankruptcy. It would take pages to list them all; however, there are a few particular terms that may hold some interest to the average person learning more about bankruptcy. These terms may not be incredibly fascinating, but they may help people to learn more about the subject and to better understand the flow of the system and the process of filing for bankruptcy.
One of the most important terms in bankruptcy is “absolute priority.” This term refers to the order of creditors to whom payment must be made. The order of the creditors will be mandated by the bankruptcy code, and this order for payment will be followed as the individual’s or company’s assets and properties are divided to pay for the debt. Likewise, “asset” is an equally important term, since most all bankruptcies will involve a division of assets. An asset for a business is considered an economic resource that will help the business in the future. The same can be said for an individual in similar terms.
There are also several chapters under which people or companies can file. Chapter eleven bankruptcy usually pertains to businesses, while chapter nine pertains to municipalities (although this is rare). Chapter seven is one of the most commonly used chapters. Under this chapter, assets are liquefied and divided among the creditors. Chapter ten has to do with small business bankruptcies. Once a case has been filed in court, it will go on the docket, which is the schedule of the hearing.
Some Terms to Learn
Of course, there are hundreds of terms that are pertinent to bankruptcy. It would take pages to list them all; however, there are a few particular terms that may hold some interest to the average person learning more about bankruptcy. These terms may not be incredibly fascinating, but they may help people to learn more about the subject and to better understand the flow of the system and the process of filing for bankruptcy.
One of the most important terms in bankruptcy is “absolute priority.” This term refers to the order of creditors to whom payment must be made. The order of the creditors will be mandated by the bankruptcy code, and this order for payment will be followed as the individual’s or company’s assets and properties are divided to pay for the debt. Likewise, “asset” is an equally important term, since most all bankruptcies will involve a division of assets. An asset for a business is considered an economic resource that will help the business in the future. The same can be said for an individual in similar terms.
There are also several chapters under which people or companies can file. Chapter eleven bankruptcy usually pertains to businesses, while chapter nine pertains to municipalities (although this is rare). Chapter seven is one of the most commonly used chapters. Under this chapter, assets are liquefied and divided among the creditors. Chapter ten has to do with small business bankruptcies. Once a case has been filed in court, it will go on the docket, which is the schedule of the hearing.
Bankruptcy and Fraud
Thu, 08/14/2008 - 16:57Bankruptcy is not usually something that most people want to become involved with. However, there are unfortunately some people who try to take advantage of the system and the purpose of bankruptcy. Bankruptcy is ideally designed to help people who are too deep in debt to pay their bills. The idea behind bankruptcy is that a person or company’s assets and properties can be divided so as to repay the creditors in an organized fashion. Once all the properties and assets have been divided, the person or company can begin to work toward rebuilding credit. Some people try to use this system to their advantage – this is where fraud comes in.
More Information about Fraud
Fraud itself is a federal crime. The act of fraud is prosecuted under Title 18 of the United States Code. People or companies who are involved in committing fraud can be prosecuted by a United States Attorney to the fullest power of the law. An act of fraud can be prosecuted after the act is referred to the attorney by the United States Trustee, the Interim Trustee, or the bank judge. When a person files with the intent of taking advantage of the system, the person can be put to trial.
Although committing an act of fraud is not the same as strategically filing for bankruptcy –an act that is still frowned upon but may be recommended to some people considering their situation- fraud may be similar in concept. When a person files with the intent to commit fraud, he may conceal his assets in order to prevent them from being divided or may commit another act of fraudulent conveyance. New measures of protection against fraud include the Bankruptcy Abuse and Consumer Protection Act, a measure passed in 2005 that aims to make it more difficult for people or companies to file for certain chapters of bankruptcy. This Act works to ensure that people are not as easily able to take advantage of the bankruptcy system. Those who do need to file for bankruptcy may find the process more difficult, but ultimately it will work to protect the innocent consumer from the costs of fraud.
More Information about Fraud
Fraud itself is a federal crime. The act of fraud is prosecuted under Title 18 of the United States Code. People or companies who are involved in committing fraud can be prosecuted by a United States Attorney to the fullest power of the law. An act of fraud can be prosecuted after the act is referred to the attorney by the United States Trustee, the Interim Trustee, or the bank judge. When a person files with the intent of taking advantage of the system, the person can be put to trial.
Although committing an act of fraud is not the same as strategically filing for bankruptcy –an act that is still frowned upon but may be recommended to some people considering their situation- fraud may be similar in concept. When a person files with the intent to commit fraud, he may conceal his assets in order to prevent them from being divided or may commit another act of fraudulent conveyance. New measures of protection against fraud include the Bankruptcy Abuse and Consumer Protection Act, a measure passed in 2005 that aims to make it more difficult for people or companies to file for certain chapters of bankruptcy. This Act works to ensure that people are not as easily able to take advantage of the bankruptcy system. Those who do need to file for bankruptcy may find the process more difficult, but ultimately it will work to protect the innocent consumer from the costs of fraud.