Most people file bankruptcy because they see it as the only effective option they have when faced with extenuating difficulties in repaying debts. These hard financial situations may include the threat of repossession foreclosure or garnishment. Generally it is when people find they have no other choice that they begin the process of doing research and discovering that according to federal law they are permitted to proceed with bankruptcy filing to get relief from their creditors.
Bankruptcy is basically a procedure that is legally permitted and involves an individual seeking to make a new monetary start. Although this process is known to be quite helpful in dealing with financial issues in some instances it is not an ideal move for every financial situation or for every person. In addition for effectiveness it is essential that bankruptcy relief is sought at the best time. The situation should be discussed with an attorney that is familiar with these kinds of cases to know if this decision is the best one. The laws concerning bankruptcy tend to change overtime and the attorney will know about these relevant changes. Legal aid companies are also available to prepare the papers to be used in the procedure for persons who are eligible for such service.
One of the reasons why financial experts recommend that people hold off on the decision to file for bankruptcy and not rush into it is because this can only be done only one time in six years. This important option should be saved for a time when it is really needed. Another reason to wait and do some research on the requirements for filing bankruptcy is that although there might be overwhelming threats from creditors if the individual does not have nonexempt wages or property he or she may not have to file bankruptcy. What this means is that there is nothing available for creditors to claim as repayment. A jail sentence will not be handed down for failure to make payments on civil debts (except for other amounts or fines ordered by the court).
Prior to the decision to file bankruptcy individuals that are in possession of non-exempt properties could sell them and buy exempt items such as clothing furniture or food with the money. However giving away the property to family members or friends then requiring that they give back ownership rights after bankruptcy filing is not an option. This is because if a property is transferred within a year prior to filing bankruptcy and fair value is not received for it this is considered as fraudulent transfer (intention to defraud). If this is found out the property is likely to be ceased by the court and the money from its sale used to repay some of the owner’s debts. Any dishonest move detected could result in the individual being denied charges and faced with the possibility of being charged with state or federal crimes. These come with jail terms and severe fines.
There are certain things that bankruptcy filing is not able to do. For example it cannot get rid of certain kinds of debts like spousal maintenance or alimony child support and some other divorce-related debts. Also the individual will not be able to get out of paying restitution orders from the court most taxes and student loans as well as criminal fines.
On the other hand when individuals file bankruptcy they are not obligated to pay all or the majority of their debts. Another advantage of this type of filing is that it can prevent foreclosure of homes and allow owners adequate time to make payments for dates that were missed. Importantly also this serves to prevent emotional and psychological distress caused from harassment from debt collectors. See also this website.