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Home » Business And Finance Articles » Bankruptcy 101 It Is 2006 Stay Informed

Bankruptcy 101: It is 2006, Stay Informed

The Basics

I know most of you know about bankruptcy, for those of you that do not, here are some basics. Generally, filing bankruptcy allows people who are having financial difficulties to wipe out their debts, which can provide them with a fresh financial start. There are several events that can take place to force people to take the path of filing for bankruptcy. Some events may include divorce, unemployment, lawsuits, foreclosures and credit card debt.

Bankruptcy serves two main purposes. It gives creditors a fair share of the money that debtors can afford to pay back and it gives debtors a fresh start. There are two ways in which bankruptcy can provide for payments to creditors and discharge for debtors: Chapter 7 and Chapter 13.

Chapter 7

Under this chapter, all unsecured debts are wiped out. These debts include credit card bills, medical and legal fees, utility bills and deficiency balances. Debtors can lose certain properties which the courts can sell and pay the proceeds to the creditors. There are some debts that cannot be discharged through this process. These debts include alimony, child support, some student loans, most taxes and debts resulting from fraud, larceny, debts and fines.

Chapter 13

This chapter is designed for people with regular income that want to pay their debts but are unable to do so. The purpose of this chapter is to help people, under court supervision, to work out a repayment plan with their creditors in which the creditors are repaid under a prolonged period of time.

Credit Card Solicitations

According to an article recently published in The New York Times by Timothy Egan, there is a woman who is a nurse and a single mother of two. She filed for bankruptcy before the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 because of her bad use of credit cards after her cancer surgery. As soon as she filed, she began to get two to three pre-approved credit cards in the mail daily. Now ask yourself, why would banking institutions and credit card companies want to attract consumers that have trouble paying off their debts? Bankers say it gives them a perfect opportunity to rebuild their credit. On the other hand, it also keeps consumers in a repetitive downward spiral of debt. Banks already know the risks of soliciting recently bankrupt consumers with a clean slate. That is why they offer them extremely high interest rates and even require a cash deposit on the card. This is why these consumers are an attractive market for credit lenders.

According to an article published in The Washington Post by Caroline E. Mayer, there is a yet-to-be-released survey of 356 debtors who filed Chapter 7 bankruptcy in 2001, 96 percent reported that they received offers for credit cards, car loans, mortgages and other credit the year after their debts were discharged. Half of the 96 percent received at least ten solicitations a month.

New Requirements

As of October 17, 2005, the new law also known as the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 makes it much more difficult for consumers to file for bankruptcy. This new law mandates enrolling in a credit counseling session before bankruptcy can be filed. People also have to complete a financial management seminar before bankruptcy is complete. The curriculum that consumers should be learning at these seminars is budget development, money management, using credit wisely and consumer information. Most of these classes will have a fee. Another critical change is "means testing." According to an article written by David A. Skeel Jr. on Bankrate.com, the means test is an effort to force more debtors to choose Chapter 13. Currently, roughly 70 percent choose Chapter 7. Any person with debt who is capable of repaying either $10,000 or 25 percent of what they owe to ordinary creditors, whichever is less, would be prohibited from filing Chapter 7. If a debtor has the means to repay a significant portion of his or her obligations within the next five years, the reasoning goes, he or she should be required to do so. The main effect of the means test is to raise the cost and bureaucracy of bankruptcy.

In addition, a few credit counseling agencies want to go above the requirements for credit counseling. "We want to go the extra step by offering free educational seminars, a financial literacy program and ongoing educational materials," says Jason Athas, Manager of Special Programs at Debt Management Credit Counseling Corp (DMCC). "We want our clients and potential clients to understand their mistakes and learn how to stay out of debt in the future." You can find out more information of the benefits DMCC offers at dmcccorp.org.

Conclusion

Most experts advise against filing for bankruptcy and recommend finding alternative ways to pay off debt. Consumers should try paying off their debts through a repayment program before choosing bankruptcy. These types of programs will teach the consumer the need to reduce expenses and save money.

Copyright 2006 Debt Management Credit Counseling Corp.

And here is another random article you might be interested in...

Home Typing Scams!

"Home Typing Scams" are one of the highest ranking work-at- home scams on the Internet according to leading Internet fraud watch dogs.

You see these "Home Typing Jobs" advertised across the Internet. You probably receive their pitches in several emails every day. These companies typically target anyone who wants to work-at-home. Unfortunately, most of these typing jobs are frauds. The following is a typical ad:

Home Typist Opportunity! We offer you an excellent opportunity to earn cash working from home as a "Home Typist." These jobs are available world wide, you can set your own hours. Make up to a $1,000 dollars a week working full time. No experience required!

Here's The Usual Scenario: You receive a pitch like above for a "Home Typing Job" in an email. The company sounds legitimate, claiming to provide clerical help to leading business firms. They claim they are over loaded with work and are recruiting new home based workers.

The ad peeks your interest.

So, you respond to the ad with high hopes. They send you a request. In order to process your application you must send them a fee of anywhere from 29.00 and up. This is the point where the red flags should go up.

Warning...Warning..Warning...Scam Alert!

But they don't. So, you send them the requested fee and wait with baited breath for your first Home Typing Assignment!

In response (if any) they send you a list of companies who might be hiring home typist. Or they might supply you with a disc that includes instructions on how you can place similar ads for home typist online or in print publications..and sell respondants the same disc. Thus joining the ranks of the scammers.

Who are the easiest victims according to online resources?

Moms at home raising children. The disabled who are not able to take outside jobs. Low income people desperate for cash. Uneducated people with no job skills.

Actually, in my opinion, just about anyone looking to make extra cash might fall prey to these deceptive and misleading ads.

Be Wise:

Remember, the majority of Home Typing Opportunities online are scams. But if you do decide to get involved investigate the company. Check the Better Business Bureau. Are they listed? How long have they been in business? How many complaints have been filed against them?

Report Offenders:

If you've been scammed by one of these companies report them to the following agencies.

The Federal Trade Commission.
www.ftc.gov

Consumer Protection Agency.

Better Business Bureau.

BB Lee (C)2004