Fears of Debtors Filing Bankruptcy - Research Paper Example

 Fear of Debtors Filing for Bankruptcy Introduction Bankruptcy has never been associated with a good outcome as most people will assume it is a period that one suffers from anguish and also from the stigma associated with one not having enough money. In this paper I examine the process of bankruptcy and some of the details that one ought to know on the issues surrounding the whole procedure of filing for bankruptcy. Furthermore I tackle the issues concerning the reasons why most debtors fear filing for bankruptcy and their thoughts and impression of what it entails to file for bankruptcy. To achieve this research, I have split my paper into two sections where I first define what bankruptcy is with an example and the second part covers the reasons why debtors fear filing for bankruptcy. Bankruptcy When most people hear the word bankruptcy they associate it with the bad reputation and loss of image in relation to money. Bankruptcy refers to the lawful happenings mostly concerning an individual or even a business that is not able to pay back amount overdue owed to a bank or an institution. Normally the bankruptcy procedure will start with the person owing the debt; the debtor petitioning the bank to file for bankruptcy (Pelc, 91). This method is the most common in a great number of situations. The other method which is not very common includes the bankruptcy petition being done on behalf of the creditors. After the process is filed, the relevant authority, be it the bank, government or any monetary institution will asses the person filing for bankruptcy. The appraisal will then be done on the debtor’s properties which will be measured and evaluated. Thereafter the properties might be used to repay part of the debt overdue. Once the bankruptcy procedure is completed the debtor will be relieved of the debt commitment incurred with the relevant institution before filling for bankruptcy. Therefore this implies that bankruptcy is a lawful position of an insolvent individual or an association, that is, one who is not able to pay back the debts they are obliged to creditors. The bankruptcy will be forced by court order that is often started by the one in debt. For companies or big organizations the process will lead to liquidation or a partly administration by a holding party. For example you might take a loan in the bank for a particular purpose and you sign an agreement of repaying a certain amount of the loan every month or after a period of time, unfortunately you lose your job that you were relying on to repay that particular loan. Since you might have no other means of repaying the loan you can file for bankruptcy with the bank and they will evaluate your properties and there after a few properties might be sold if they are worth it and this will recover a part of the bank’s money, after a given period of time and once the bank is able to recover a portion of their money then they can opt to free you from the debt owed and all the obligations concerning the debt will be freed (Buchbinder, and Cooper 33). By filing for bankruptcy you as an individual debtor or your business will be offered an opportunity to begin afresh as the debts that are not possible to repay will be forgiven and the ones you owe some money will get a few portion as a determiner of refund depending on the properties that are available. In practicality once you file for bankruptcy it can work as an advantage to largely the financial system by providing individuals and companies or business a fresh opportunity and providing creditors with an appraise of debt reimbursement (Greiner 29). However, most debtors will never file for bankruptcy as soon as the need arises since they are plagued with unknown fear of what the bankruptcy process entails and also they are concerned with the impact of bankruptcy on their own life therefore, the people will suffer in silence or live in wallow as they hide from the creditors. Some reasons why debtors fear filing for bankruptcy include: Loss of everything: Once a debtor files for bankruptcy it implies that the debtor does not have adequate cash therefore the bankruptcy has not taken any of the cash in the first place. Furthermore according to the Chapter 7 and 13 of the Bankruptcy Code under the Title 11 of the United States Code, the properties found in the house will be protected and therefore they cannot be sold to recover the debt for the creditors (Buchbinder, and Cooper 78). This will cater for the basic furniture and items in the house like bed, seats and many others provided the household properties are not very valuable and expensive. After filing for bankruptcy the creditors and bankruptcy trustees will not come and seize the personal belongings. This will extend to the tools of trade that one uses. In the cases where one is not bankrupt the bailiff and auctioneers can come and take any property and auction any of the properties that you own, in other cases a certain percentage of the wage that you earn can be taken to repay the debt. With all the exemptions elaborated in Chapter 7 and 13, most of the common debtors who are bankrupt tend to keep nearly all of their personal belongings after filling for bankruptcy. Jail Time: As a debtor it is not a crime not to be able to pay your debts. This means that you are not a criminal for not having cash and by filing for bankruptcy you will not be sent to jail unless when filing for bankruptcy you withhold some information which under Chapter 7 indicates that it is unlawful to conceal or with hold information concerning a financial condition. Longer time to repay the debt: In most cases when one files for bankruptcy, the process will not last a lifetime since most of the debtors will be out of a bankruptcy within a very short time especially for those who file the bankruptcy under the Chapter 7 of the Bankruptcy Codes (Buchbinder, and Cooper 77). Furthermore even if the bankruptcy is filed under Chapter 13, the procedure of creating and receiving consent for the reimbursement plan will be in a few months. By repaying the debts under the Chapter 13 on bankruptcy means that the debt can be completed within a period of 3 years to 5 years and you will be debt free. Earning restrictions: Debtors fear that by filing for bankruptcy they will be restricted on their earnings. In reality, it is exactly the opposite as the bankruptcy trustees and officials would encourage you to earn as much as possible. By earning more your debt will be cleared at a faster rate with the contributions you make. However there is a limitation on the jobs that you can do which include jobs like being a director of a company or even holding a job that would require a government permit or even one that gives you an opportunity to manage a trust account. Some of the jobs under this category will include being a politician, lawyer or even an accountant. On the other hand if there is a business you run, you can do it as a sole trader or even as a contractor provided that the contract is done with your name on it and not of a business entity. Business Restrictions: The debtors especially those who have a business fear that by filing for bankruptcy the creditors would cancel and refuse to do business with them in the future. The creditors in most cases will be most willing to continue trading with you after the bankruptcy ends as they are in the commerce of making money. Access to bank services: The common misconception of the people in debt who fear filing for bankruptcy is that the access to bank services like getting loans and also opening other bank accounts. When one borrows some money from the bank it implies that that person has not enough money for a particular project or activity he or she want to do. With the bankruptcy laws in place, you will not be banned from taking a loan or credit from the banking institution. For the large credit borrowing, information about your bankruptcy will have to be provided to the credit provider and even if the credit information in this case your bankruptcy is not given to the credit provider, they will still do a credit check on your finances and financial situation. By filing for a bankruptcy it gives you an edge of your credit merit or worthiness meaning that without the debts you have, you would have been able to save as much amount of money you had been settling. Depending on your ability to pass some normal criteria for mortgage like your account having some deposit, having a steady job and the possibility of repaying the mortgage; the mortgage companies will be more than willing to provide you with a mortgage. The basis of the monetary institutions is to make money and at the end of the day to get a good return so once you prove you have the prospect of good financial capabilities then you will be given the same treatment as the initial period that you borrowed before filing for bankruptcy. In addition your access to bank accounts will be granted even withdrawing unless the account has been overdrawn especially the checking account. Additionally, you will not be disqualified from opening an account with other banks after the bankruptcy period. Conclusion By demystifying the myth surrounding the bankruptcy process, it is clear that most of the debtors who fear filing for bankruptcy are driven by the hearsay concerning the effects of a bankruptcy. In most cases their thoughts and insinuations surrounding bankruptcy are untrue and the best way to check the facts is by examining the Bankruptcy codes and also incase of queries referring their questions and doubts to the relevant bankruptcy trustees. Reading more bankruptcy codes, rules and regulation will provide a deeper insight of the whole process of bankruptcy and the rules governing them. Works Cited Buchbinder, D. L., and Cooper, R. J. 2009. Basic bankruptcy law for paralegals. Austin: Wolters Kluwer Law & Business. Greiner, M. 2010. Bankruptcy 101: An insider's guide to filing Chapter 7 bankruptcy by yourself without an attorney. Nashville, IN: NorLightsPress. Pelc, M. 2008. When you have to file for bankruptcy: Step-by-step instructions to take control of your financial future. Ocala, Fla: Atlantic Pub. Group. Read More