Bankruptcy is one of the most difficult decisions an individual ever has to make.  Before making a decision on whether or not to file for bankruptcy, an individual should talk to an attorney and explain his or her situation.  According to http://www.daveramsey.com/article/the-truth-about-bankruptcy/ <http://mail.ssrl.com/exchweb/bin/redir.asp?URL=http://www.daveramsey.com/article/the-truth-about-bankruptcy/> , bankruptcy is not something that he would recommend any more than he would recommend a divorce.  Few people who have been through bankruptcy would report that it is a painless wiping-clean of the slate, after which they just start fresh.  Bankruptcy is listed as one of the top five life-altering negative events that a person can go through along with divorce, severe illness, disability, and loss of a loved one.  Bankruptcy leaves deep wounds both to one’s credit report and to one’s psyche. 

            According to http://www.debtconsolidationcare.com/avoid-bankruptcy.html <http://mail.ssrl.com/exchweb/bin/redir.asp?URL=http://www.debtconsolidationcare.com/avoid-bankruptcy.html> , there are seven reasons to avoid bankruptcy.  One, an individual’s credit is badly hit if that person files for bankruptcy.  Two, an individual may lose their property.  Three, not all of an individual’s debts can be eliminated.  Four, creditors and lenders of an individual may repossess property.  Five, bankruptcy has an adverse effect on an individual’s other finances such as buying a house, renting a home, or buying a car.  Six, an individual may not qualify for a secured loan for at least 2-4 years.  Finally, not all retirement plans are protected, if an individual files for bankruptcy. 

            Remember, there are a lot of benefits to filing bankruptcy, if a person has no other option.  However, a person who is contemplating filing for bankruptcy has to consider the negative effects of filing for bankruptcy. 

            According to http://www.financial-edu.com/why-should-you-avoid-bankruptcy.php <http://mail.ssrl.com/exchweb/bin/redir.asp?URL=http://www.financial-edu.com/why-should-you-avoid-bankruptcy.php> , there are four good ways to avoid bankruptcy.  One way to avoid bankruptcy is to do debt consolidation.  Another way to avoid bankruptcy is through individual voluntary arrangements which enable an individual to reach a compromise with their creditors and avoid the consequences of bankruptcy.  Third, an individual could use counseling services from many free organizations for effective debt management.  Finally, an individual has the option to sell off everything, including their valuable assets, to pay off their various debts.

Just like individual debtors, a corporation can file for bankruptcy as well.  Just like an individual, a corporation must weigh the pros and cons of filing bankruptcy.  According to http://www.ehow.com/way_5717286_procedures-corporation-filing-bankruptcy.html, filing for bankruptcy on behalf of a corporation is different from filing as an individual, even though a corporation is treated as a separate legal entity under corporate law.  The financial and tax consequences of bankruptcy for a corporation can be complex and hard to predict.  Before a bankruptcy application is finalized, these consequences need to be taken into account.  

There are two main forms of corporate bankruptcy.  There is a Chapter 7 bankruptcy where a trustee is appointed by the court to supervise corporate assets, liquidate the assets, and distribute money to the corporate creditors.  In a Chapter 11 bankruptcy, the corporation submits a plan for reorganization of its operations.  According to http://www.corporationbankruptcy.net/, many businesses choose a Chapter 7 corporation bankruptcy when they will shut down the business or “go out of business” and liquidate all their assets.  One result of a Chapter 7 corporate bankruptcy is the loss of jobs for the company’s employees.  Sometimes a company makes this choice based on hardship within the company; other times the company’s creditors make the choice to file a Chapter 7 corporate bankruptcy. 

What happens to the stocks of a corporation, if the corporation files for bankruptcy?  According to http://www.sec.gov/investor/pubs/bankrupt.htm, a company’s securities may continue to trade even after the company has filed for bankruptcy under Chapter 11.  In most instances, companies that file under Chapter 11 of the Bankruptcy Code are generally unable to meet the listing standards to continue to trade on NASDAQ or the New York Stock Exchange.  However, there is no federal law that prohibits trading of securities of companies in bankruptcy.  Regardless, investors should be cautious because buying stock in companies that have filed a Chapter 11 bankruptcy can be risky.

Deciding whether or not to file bankruptcy is a huge decision as well as a very personal decision.  There are no set rules that say when an individual should file bankruptcy.  However, there are many different sources out there that can offer advice as to when it might be appropriate for an individual to file for bankruptcy.

According to http://www.bankrate.com/finance/money-guides/get-the-facts-on-bankruptcy.aspx, there are a number of things to consider if you are facing bankruptcy.  First, the debtor should see if they can solve their financial problems without bankruptcy.  Second, a debtor should not file until they have fixed the problem that has gotten them into their current financial situation.  For example, if a debtor is not going to have a clean slate 6 months from now then the debtor will just have a new set of bills and no bankruptcy options.  Third, a debtor should be aware of the ways to reduce the cost of filing for bankruptcy.  There are ways to cut the filing fees for bankruptcy.  Finally a debtor should know that bankruptcy doesn’t necessarily mean having to give up their car.  A debtor may be able to reaffirm their loan and keep their car.

According to http://consumer.abi.org/consumers/should-i-file-for-bankruptcy , some people find it helpful to file a bankruptcy case when they cannot pay their bills and they do not anticipate having the ability to pay their bills in the near future.  People also file because their financial situation is causing them emotional distress or depression, or because they would like to free themselves of debt now, if legally allowed, and have their income and assets to themselves in the future.

Finally, an individual should try to exhaust all other options before filing for bankruptcy.  According to http://money.usnews.com/money/personal-finance/articles/2009/04/21/should-you-file-for-bankruptcy.html, before an individual files for bankruptcy, they should consider whether or not they can work out their financial problems without filing for bankruptcy.  If an individual is unable to, then bankruptcy might be their best option.

Bankruptcy is a huge decision for a person in debt.  The question becomes for that person, when does filing for bankruptcy make sense?  According to http://www.investopedia.com/articles/pf/08/bankruptcy-filing.asp#12870097117542&close <http://mail.ssrl.com/exchweb/bin/redir.asp?URL=http://www.investopedia.com/articles/pf/08/bankruptcy-filing.asp%2312870097117542%26close> , there are a few circumstances in which filing for bankruptcy can be beneficial.  The first is if the debtor has already tried to negotiate with their creditor.  If a debtor has tried to negotiate with a creditor and they have not been successful, then a debtor might have no choice but to file for bankruptcy.  Second, if their liabilities exceed their assets, a debtor may have no choice.  The major reason that debtors file bankruptcy is because they cannot pay their debts.  The third reason that filing might be right is if a debtor is trying to keep their IRAs.  The federal bankruptcy laws shield a debtor’s retirement accounts.  A debtor might want to consider filing bankruptcy to protect these accounts.

Deciding whether to file bankruptcy or not is a personal decision.  According to http://consumer.abi.org/consumers/should-i-file-for-bankruptcy <http://mail.ssrl.com/exchweb/bin/redir.asp?URL=http://consumer.abi.org/consumers/should-i-file-for-bankruptcy> , some people find it helpful to file a bankruptcy case when they cannot pay their bills and they do not anticipate having the ability to pay their bills in the near future.  Other people file because their financial situation is causing them emotional distress or depression, or because they would like to free themselves of debt now, if legally allowed, and have their income and assets to themselves in the future.  Some people may find that bankruptcy is worth it even if they do lose some of their assets.

There are no set rules as to when a debtor should file for bankruptcy.  It is a personal decision and only the debtor truly knows if bankruptcy is right for them.  According to http://www.bankruptcyhq.com/bankruptcy-should-i-file <http://mail.ssrl.com/exchweb/bin/redir.asp?URL=http://www.bankruptcyhq.com/bankruptcy-should-i-file> , studies suggest that bankruptcy may be right for a debtor in any of the following scenarios: the debtor has a large number of dependents, the debtor is older in age, the debtor has a large amount of dischargeable debt, or the debtor has a small amount of savings and assets. These are all important things to consider in deciding whether to file for bankruptcy, but each debtor must weigh the pros and cons based on their individual circumstances.

Considering Bankruptcy?

Bankruptcy can be very helpful to a debtor, but it can also impact a debtor in a negative way.  A debtor must weigh the advantages and disadvantages before filing bankruptcy.  According to http://www.abanet.org/publiced/practical/bankruptcy_disadvantages.html <http://mail.ssrl.com/exchweb/bin/redir.asp?URL=http://www.abanet.org/publiced/practical/bankruptcy_disadvantages.html> , a bankruptcy is a troublesome item on a debtor’s credit record for up to ten years and may affect a debtor’s future finances.  A study by the credit research center at Purdue University found that about one-third of consumers who filed for bankruptcy had obtained new lines of credit within three years of filing; one-half had obtained them within five years.  However, the new credit itself may reflect the record of bankruptcy.  As an example, a debtor may be able to get a credit card after bankruptcy but instead of an interest rate of 14 percent the debtor gets a rate of 20 percent as a result of the bankruptcy being on their record. 

            Another disadvantage to bankruptcy is the potential loss of property.  According to http://www.nacba.org/consumer/chapter2.php <http://mail.ssrl.com/exchweb/bin/redir.asp?URL=http://www.nacba.org/consumer/chapter2.php> , one consequence of a Chapter 7 bankruptcy is the loss of nonexempt property or its value in cash.  However, this is not usually a problem for consumer debtors because they rarely have any nonexempt property. 

            There are a few more disadvantages of which a debtor should be aware.  According to http://www.articlesbase.com/credit-articles/disadvantages-of-bankruptcy-516316.html <http://mail.ssrl.com/exchweb/bin/redir.asp?URL=http://www.articlesbase.com/credit-articles/disadvantages-of-bankruptcy-516316.html> , there are a few additional drawbacks to filing bankruptcy.  First, if a debtor is a businessman or a business owner and has been declared bankrupt, then their business will get closed as soon as the bankruptcy order is issued.  Second, a debtor will also have to submit all their valuable assets or belongings to the trustee.  Third, by becoming bankrupt the debtor’s bank accounts get closed and their credit cards will be taken away.  Finally, people who are in the process of leasing a product or buying a product on hire, will lose that product, and the product will be returned to the actual owner. 

            Bankruptcy has its advantages and disadvantages so it is important that a debtor know both and make an educated decision in determining if bankruptcy is best for them.

There are six different types of bankruptcies that a debtor can file.  A debtor can file a Chapter 7, Chapter 9, Chapter 11, Chapter 12, Chapter 13, or a Chapter 15 bankruptcy.  Chapter 7 and 11 bankruptcies are the most commonly filed types of bankruptcies.  According to    http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics/Chapter7.aspx, a Chapter 7 proceeding does not involve the filing of a plan or repayment as in a Chapter 13 proceeding.  Instead, the bankruptcy trustee gathers and sells the debtor’s nonexempt assets and uses the proceeds of such assets to pay holders of claims, like creditors, in accordance with the provisions of the Bankruptcy Code.  A Chapter 13 proceeding offers individuals a number of advantages over liquidation under Chapter 7.  One such advantage is an opportunity to save their homes from foreclosure.  Individuals can stop foreclosure proceedings and may cure delinquent mortgage payments over time through a Chapter 13 filing. 

            Chapters 9, 12, and 15 are less common types of bankruptcies.  According to www.outofbankruptcy.info, a Chapter 9 bankruptcy is a formal proceeding that allows an individual or business to get their financial debts under control.  This type of bankruptcy was developed to help debtors and creditors. 

            According to http://www.extension.umn.edu/distribution/businessmanagement, Chapter 12 was added to the Bankruptcy Code in 1986.  It was designed specifically for the reorganization of family farms.  Chapter 12 is closely modeled after Chapter 13, however it has a higher debt ceiling and, therefore, applies to many more farm operations.  Chapter 12 is only available to persons who meet the definition of “family farmer” set forth in the statute.  A family farmer may be either an individual or a corporation or partnership. 

            A new chapter recently added to the Bankruptcy Code was Chapter 15.  It was added by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.  The purpose of a Chapter 15 proceeding is to provide effective mechanisms for dealing with insolvency cases involving debtors, claimants, assets, and other interested parties involving one or more countries.  Chapter 15 proceedings are very rare and not used very often as compared to a Chapter 7 or Chapter 11 proceeding.

Can I Choose The Type Of Bankruptcy I Want?

There is some degree of choice but there are limits.  The limitation of choice is based upon income.  If your income is below the median income for the same size household, you may have some power to choose either a chapter 7 or a chapter 13.  If your income is above the median you may have less power to choose and will probably have to file under chapter 13 if you file bankruptcy.  However, some people with income above the median may still file under chapter 7, if they have a sufficient level of the right types of debt and whose living expenses conform to those favored by Congress as per 11 USC §707(b)

What are the right types of debts and living expenses?

• Non-consumer debts which are greater than consumer debts
• Debts which are secured by your home, the higher they are the more likely you will have a choice
• Debts which are secured by two vehicles you own; the higher the  payments the more likelihood you will have a choice in bankruptcy
• Expense for mandatory payment of union dues as deductions from your paycheck.
• Expenses which are for  mandatory payroll deductions for retirement
• Expenses for non-real estate taxes (income taxes, Social Security taxes, Medicare taxes, self employment taxes)
• Expenses for  term life insurance insuring your life
• Expenses which are Court ordered such as child support or spousal support
• Expenses for education which are a condition of your employment
• Expenses for the education of a physically or mentally challenged dependent child where there is no available public education providing similar services
• Expenses for health care which exceed the standard deduction
• Expenses for reasonably necessary health insurance premiums, disability insurance premiums or monthly costs for a health savings account
• Expenses for care and support of an elderly, chronically ill or disabled household or family member who is unable to pay such expenses
• Expenses for home energy costs which are in excess of the standard amount allowed in the IRS local standards
• Document-able education expenses for a child under age 18 up to $137.50 per month per child.
• Expenses for continued charitable contributions which are in the form of cash or financial instruments