A personal bankruptcy is a form that when filed will discharge obligations to creditors. Bankruptcy forms can be located online or an attorney can prepare one for you.
Contrary to popular belief, personal bankruptcy does not discharge all debts. Specific types of student loans, called secured student loans, must be paid even after some one has filed bankruptcy. Also, it won’t discharge taxes owed to the state or federal government. Likewise, child support payments and money owed to victims of drunken driving accidents will still be required to be paid.
Personal Bankruptcy does however discharge ‘unscheduled debts’. Unscheduled debts are things like money owed to creditors, which include credit card companies, auto loan lenders, and money owed to personal contacts that lent you money. These creditors and others who are owed must line up to try and get any property not exempt under their state’s exemption laws. Those who are deemed most worthy get their pick of the debtor’s bankruptcy estate first, and on it goes until nothings left but assets that are exempt from being taken under that state’s laws.
Usually states do a good job of keeping these creditors from taking everything because generally most creditors may not even receive a single penny. Since the stakes are so high for these creditors, they often try to band together to fight over who gets first pick of the bankruptcy estate, just so they can recover a fraction of what’s owed to them. It’s a rather fruitless fight creditors have to go through but most people say they deserve it for lending an amount the debtor has no ability to repay.
Often time’s businesswomen or businessmen file for personal bankruptcy for themselves and their company. It’s perfectly ok to file for a bankruptcy while you’re simultaneously filing for a bankruptcy for your business. These cases tend to be more complicated though, which can cause ‘legal sparks’ to fly when exemption laws collide.
Filing for personal bankruptcy is usually a very relieving experience for most people. They feel like the weight on their shoulders has lifted, it’s like the greatest gift you could give them. Most people avoid credit as much as possible for a few years until their credit report is clean again so they don’t have to deal with the ‘ballooned interest rates’.
Theirs others who talk of repairing your credit score right after bankruptcy to lower those interest rates. I think that kind of talk just gets people in trouble again, because everyone knows the best way to get your credit score up is to get credit cards and loans that will just put you back into debt.