A chain of events often starts when a business goes bankrupt. Smaller creditors may not have secured loans for merchandise or services they gave to the business and for which they are owed. Those without secured loans will generally not see those funds as the business owners often liquidate as much as they can prior to filing Chapter 7. When a business goes bankrupt, the people who are most often injured the most are the employees that are depending on their paychecks, and small creditors, such as suppliers, who sold the business items or service on credit.

Probably the most common business to go bankrupt in the United States are restaurants. A restaurant is the easiest business to open, but the most difficult to maintain. Restaurants often buy food products from suppliers, have a large staff who cook and wait on tables and owe a mortgage on their property. When a business goes bankrupt, such as a restaurant, employees usually find themselves out of work and suppliers incur debt. In such cases, only the bank holding the mortgage gets any payment. When a business goes bankrupt, a trustee is assigned to handle the finances of the establishment. If it is a large business, many times it is sold to another entity and some employees keep their jobs. If it is a small business, however, the impact on the employees and suppliers can be catastrophic. In many cases, when a business goes bankrupt, it starts a chain reaction that adversely affects other businesses and employees.

Individuals who have recently filed bankruptcy should read the fine print on any credit card offers. If they are being offered an unsecured credit card, chances are the card has very high interest and monthly fees associated with owning the card. While many individuals may want to “rebuild” their credit history right away, they should be forewarned that the bankruptcy will stay on their credit history for ten years. Although this will adversely affect their credit score, individuals can take steps to repair their credit by getting a secured credit card. A secured credit card usually borrows against assets or money in the bank. The interest rates for a secured credit card are generally very low and the fees are much less than an unsecured credit card. Life after bankruptcy should include living within one’s means. For this reason, after bankruptcy individuals should opt for a secured credit card that can be used in emergency situations.

Some individuals will be tempted into buying new cars when they receive offers from predatory lenders for new car loans at 20 percent interest. Life after bankruptcy, again, should be about living within one’s means. Although a new car is desired by just about everyone, an individual is better off keeping an older car that is paid for than incurring more debt for yet another car, at very high interest rates. One of the most difficult things to purchase with bad credit is a car. Cars are usually very expensive and can easily be moved. For this reason, many reputable lenders will approve a car loan for someone with bad credit. Predatory lenders, however, will.

An individual can purchase a home after bankruptcy easier than they can buy a car. After two years, individuals who file Chapter 7 will be able to get a mortgage from some lenders. The rate will be higher than for other individuals with good credit, but since shelter is necessary to live and real estate is usually a good investment, purchasing a home with a mortgage and making timely payments on schedule is probably the best way you can rebuild your credit.

Although a bankruptcy stays on one’s credit for 10 years, there is life after bankruptcy. Individuals should realize what caused their debts to accumulate and avoid repeating the same errors in the future. Life after bankruptcy can be good, as long as those individuals who file bankruptcy learn from past mistakes and take steps to avoid making those same mistakes again.

People in the United States tend to live on credit quite a bit. Many individuals feel pressured to keep up with neighbors, friends and family and end up overextending themselves on their credit cards. Unfortunately, credit card lenders are pretty indiscriminate as to who they issue credit. There are hundreds of thousands of credit card companies in the United States today. And once someone gets one credit card, chances are they will begin to see many offers coming through the mail for more credit.

This can be tempting, especially for younger people. A good percentage of people who file bankruptcy in the United States each year are young people recently graduated from college. In addition to student loans, college students often use credit cards for everything from pizza to books, with the intent to pay off the debt once they graduate and get a job. Hard reality sets in when they realize how long it will take to pay off the debt mounted on their credit cards, especially as it continues to accumulate interest at a high rate. Still, college students are a prime target of credit card lenders. And many of these young people are handling credit for the first time in their lives. It is very easy to let it get out of hand.

How to avoid bankruptcy? Individuals must learn, early on, to live within their means. This is especially true for young people. Parents should teach children early on how to use credit in a responsible way. College students should limit themselves to one credit card with a low balance, to be used just for emergencies.

Another way how to avoid bankruptcy is to use debit cards instead of credit cards. Debit cards are usually offered by banks and the money is taken directly from your checking account. Because most debit cards usually have a VISA or MASTERCARD logo, they can usually be used in the same places as a credit card. Only the funds are available in the account, not owed.

Individuals who want to learn how to avoid bankruptcy can also take seminars and classes on financial management. Here they can learn which items are wise to buy on credit (real estate) and which items to avoid buying on credit (vacations) as well as investment strategies.

Living within your means and only buying things you can afford is one way how to avoid bankruptcy.

Another reason for filing bankruptcy is a catastrophic event, such as hospitalization, that leaves one with very high debts and no visible way to pay them off. About half of all bankruptcy cases are due to the debtor or someone in their family being hospitalized without insurance. These people often will never be able to pay off $100,000 in medical debt, even at little or not interest rates.

Other reasons for filing bankruptcy include young people who get in over their heads with credit card debt in college. About 10 percent of those filing bankruptcy are less than 25 years old. These young bankruptcy filers usually amass large student loans in addition to massive credit card debt while in college. Although most student loans are not dischargeable under current bankruptcy laws, unsecured debt, such as credit card debt, is fully dischargeable. Under current, new laws, people with the financial means to pay off the debt must do so, or at least make an attempt.

Filing bankruptcy is never easy, but there are many reasons why people decide to take this step. Filing bankruptcy is sometimes the only way out of a bad financial situation.

One example of debts exempt from bankruptcy is child support. If you have been ordered to pay child support payments, or maintenance, by a court order, filing bankruptcy will not alleviate these debts. Child support debts will not be reduced or eliminated, whether or not you file Chapter 7 or Chapter 13 bankruptcy. Many people try to avoid paying these obligations, but child support is considered to be one of the debts exempt from bankruptcy.

Another example of debts exempt from bankruptcy is IRS liens. An IRS audit is never pleasant, and in some cases, the IRS may put a lien on your home or garnish your wages. Although IRS liens and garnishments can end up costing someone quite a bit of money, IRS liens are debts exempt from bankruptcy.

Judgments from court orders that award another individual or creditor a certain amount of money acquired in a lawsuit is another example of debts exempt from bankruptcy. Such judgments cannot be discharged, and for this reason, those who have not paid their bills in quite a while, should find out if there are any judgments outstanding awarded by the court against them prior to filing bankruptcy. Creditors sometimes sue an individual for not paying their bills, however this is usually a time consuming measure and it takes quite a while for a judgment to actually be ordered by the court. Furthermore, the individual is supposed to be notified of any pending litigation. If a creditor does manage to get a judgment against you prior to your filing bankruptcy, the judgment will be considered a debt exempt from bankruptcy. For this reason, those who are considering filing bankruptcy must do so in a timely manner.

Government loans are also considered debts exempt from bankruptcy. If you have student loans funded by the government, you will not be able to have them discharged by filing bankruptcy.

If you are thinking about filing bankruptcy, examine your debt to discover which bills are considered debt exempt from bankruptcy prior to filing.

The purpose of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, with regard to bankruptcy, was to eliminate people who took advantage of the bankruptcy laws for their own gain. For most people, filing bankruptcy is one of the most traumatic experiences they have to endure. Most people who file are ashamed and embarrassed at having failed to pay their debts. Most people are raised to pay off their debts in a timely manner and most Americans are very credit conscious individuals. We worry about our credit scores and borrowing power to the point of mania.

Some individuals, however, do not care about their credit scores at all. Nor do they care about paying back money that they have borrowed. There is no debtors prison in the United States, and credit card companies routinely hand out credit cards to just about everyone. Although you can only file Chapter 7 bankruptcy every 8 years, there were many individuals who were doing just that: Filing Chapter 7 bankruptcy every 8 years. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 is targeted at these individuals who made filing bankruptcy a way of life. These abusers of the bankruptcy laws would routinely run up credit every seven years and simply file bankruptcy on the eight year. Every year. This cost credit card companies and banks millions of dollars that they promptly passed on to customers by way of higher interest rates and fees.

With the Bankruptcy Abuse Prevention and Consumer Protection Act, individuals who are able to pay off part of their debt must do so under Chapter 7. Individuals who make more than the median income for their state, must pay back their debt. Individuals who do not make a lot of money are still able to discharge their debt.

Because so many people abused the generous provisions of the old bankruptcy laws, new laws were required to keep “serial bankrupts” from filing Chapter 7 every eight years. For this reason, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was drafted and enacted into law.

Bankruptcy filing is mandated by federal courts. For this reason, bankruptcy law is the same throughout the United States. Bankruptcy petitions are filed in Federal court in what is known as “bankruptcy court.” An individual or their attorney files a petition in bankruptcy court asking for protection from the court against creditors and, if filing Chapter 7, elimination of their debt.

An individual filing bankruptcy must fill out disclosure papers that indicate the total amount of their assets. The disclosure form will ask how much you earn, an itemization of all of your debt, including mortgage and car payments, and any other assets you may have in the bank, in stocks or in savings plans. Falsifying information on this form is a federal offense, and many people end up in prison every year for bankruptcy fraud.

If you owe more than 80 percent of your homes value in a mortgage, you may keep your home. You can also keep your car if it is worth less than $2,000. You are also allowed to keep $2,000 in cash when filing bankruptcy. The purpose of filing bankruptcy is not to make you indigent, but to protect you from creditors and either reduce or eliminate your debt. The bankruptcy court does not expect you to live in a tent and give up your car and all worldly goods. People need a place to live, transportation to get bank and forth to work, food and clothing and the bankruptcy court realizes this. For this reason, certain items are considered assets that are exempt from bankruptcy.

Children’s college funds are also exempt from bankruptcy, as long as they are in a special college fund account. In most cases, pensions and IRA accounts are also exempt from bankruptcy. There is usually a large fee associated with removing IRA funds as well as tax penalties; for this reason, these accounts are left intact and considered exempt from bankruptcy.

Although you will have to give an estimate as to the value of your furniture and personal possessions, no one will come to inspect your home to discover that your sofa is actually worth $600 when you listed it as $500. If, however, you have a large coin collection worth hundreds of thousands of dollars and you do not declare it as an asset, you can be subject to a violation of federal bankruptcy law and either imprisoned or fined.

Declaring bankruptcy is never easy, but you do not have to lose everything you own. If you have reached the point of bankruptcy, most of what you own is more than likely assets that are exempt from bankruptcy law.

After you tell the creditor that you have filed bankruptcy, that creditor should no longer contact you. If they do, make a note of the time, date, name of the person who called and what was said. The creditor is in violation of Federal law. One of the biggest advantages of filing bankruptcy is to protect debtors from harassing calls from creditors and collection agencies.

If you file Chapter 7 bankruptcy, under new provisions you must demonstrate that you are unable to pay even a portion of the debt to the bankruptcy court. Once this is proven, your credit debt is completely eliminated and your slate wiped clean. Another one of the advantages of filing bankruptcy include the opportunity to start over.

If you have a business that is insolvent, meaning that it has less assets than debts, advantages to filing a business bankruptcy could include not losing your home or personal belongings if your business is incorporated as a separate entity and you have not personally signed for any loans. For this reason, those starting a business should always incorporate the business, put assets in the name of the corporation and also only sign loans as a corporate officer. Although your business may be bankrupt, your home and personal assets will remain safe from creditors.

The decision to file bankruptcy is never an easy one, but the advantages of bankruptcy can protect you from lawsuits from creditors, free you from debt and enable you to make a fresh start in life.