Bankruptcy. For those who have only heard the word without more, it can mean many things.
Some equate it with poverty. Others think of it as a fresh start. The truth is that many people don't fully know what bankruptcy is all about. Yet more than 1.2 million Americans filed for bankruptcy in 2012, according to the federal court system.
Whether it's affecting you, a friend, or a loved one, here are three things to know about bankruptcy:
- Bankruptcy and poverty aren't the same thing. Bankruptcy is a fresh start. The basic idea behind bankruptcy is that it wipes your debts clean. While some think that bankruptcy and poverty mean the same thing, they actually mean two entirely different things. Poverty is a state of financial being. Bankruptcy is a legal proceeding to relieve one of their debts. In many cases, poverty and bankruptcy go hand in hand. But rest assured, the two words mean entirely different things.
- Not all of your debts are wiped away in bankruptcy. A bankruptcy is supposed to wipe away the debts of the debtor. But not all debts can be discharged in a bankruptcy. For one, tax debts can stay even after a bankruptcy. The same goes for student loan debts, much of the time. So if you plan to file for bankruptcy, it's wise to think ahead and use any available cash to pay off the nondischargeable debts before filing for bankruptcy.
- Forms can be helpful, but you may need professional help. Many services like LegalStreet offer packages of bankruptcy forms tailored for your state, but a bankruptcy can be complicated and you may need a lawyer's help to resolve your case. That's why LegalStreet also offers prepaid legal plans that give you unlimited access to on-call attorneys who can help answer basic questions. You can also search for bankruptcy lawyers near you in our online directory.
To learn more about bankruptcy, check out FindLaw's Bankruptcy section and download our free Guide to Chapter 7 Bankruptcy.
Disclosure: LegalStreet and FindLaw.com are owned by the same company.
Related Resources:
- Bankruptcy's Long-Term Effects On Your Credit (FindLaw's Law and Daily Life)
- Is Chapter 7 Bankruptcy Right for You? (FindLaw's Law and Daily Life)
- 5 Tips to Consolidate Student Loans (FindLaw's Law and Daily Life)
