What is Bankruptcy?
Before you decide to file for bankruptcy, it is a good idea to understand what bankruptcy is and what it is not. Most people have a general understanding that bankruptcy is a legal way to relieve a person or company of their debts. The United States Bankruptcy Court says that bankruptcy is a way to give an honest debtor a fresh start in life by relieving the debtor of most debts and to repay creditors in an orderly manner to the extent that the debtor has property available for payment.
Even though it may seem like the debtor can simply escape the creditors and that’s the end of it, bankruptcy and the bankruptcy process can get quite complicated. There are many decisions that must be made prior to choosing bankruptcy. You must understand which debts can be written off, what property you can keep, and what type of bankruptcy will fit your situation. Different rules apply depending on whether you are an individual or a company.
Bankruptcy is Not a Crime
Many people worry that bankruptcy will lead to time in jail. Historically, and in some countries that may be the case, but in the United States debt is not a crime. In fact, the American economy is built around spending money and going into debt. Credit card companies send billions of offers every year to people with huge debt and poor credit. Buying a house undoubtedly means going into debt. Buying a vehicle almost always requires some form of debt. Failing to repay debts may result in a lawsuit from creditors, but will not result in jail time unless if was taken on as part of an illegal act such as fraud or failure to comply with a court order. Any creditor or collection agency that threatens jail time because of debts is actually in violation of the Fair Debt Collection Practices Act.
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