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BANKRUPTCY

What is Bankruptcy?

  • Bankruptcy is a legal lifeline for individuals or businesses who can no longer pay their debts.

  • By filing for bankruptcy the Bankruptcy court can eliminate all, some or none of your debt.

How do you start the process?

  • Take an assessment of your own assets and debts and your ability to repay your debts.
  • If your debts outweigh your assets and you don't see a way that your near future income can cover your debts you may want to consider filing for Bankruptcy.
  • You would then meet with an attorney and decide what form of bankruptcy is right for you.
  • Most common forms are Chapter 7, Chapter 11, Chapter 13.

Types of Bankruptcy

  • Chapter 7: The most common form of bankruptcy. Under Chapter 7, you can eliminate most of your personal debts like credit cards, personal loans not secured by collateral. All collection actions come to a stop.
  • Chapter 11: Known as reorganize bankruptcy. Reorganizes a businesses debts and assets and allows time for a business to become profitable again. Trustees are appointed to sell assets allowing money to pay off debts to creditors or investors.
  • Chapter 13: Eliminates certain debts by entering a repayment plan over a 3-5 year period. Requires you to make monthly payment to the court and the court redistributes funds to pay off your debts.

Bankruptcy in our community

Which personal bankruptcy is right for you?

  • My mom had worked for Washington Mutual for many years and that was the first time I had heard about bankruptcy.

  • On September 25, 2008, the government seized WaMu due to it's massive debt from allowing an immense amount of mortgages to be taken out.

  • The next day WaMu filled a Chapter 11 bankruptcy which was the second biggest bankruptcy following Lehman Brothers.

  • Chase bank bought the company for 1.3 billion.
  • Chapter 7 bankruptcy is suitable for someone who has few assets, barely enough income to get by and have more debts than assets.
  • Chapter 13 bankruptcy is best for those who want to keep their assets and can pay living expenses but not debts.

Limitations

  • Filling bankruptcy affects your credit sometimes up to 10 years.

  • You will loose all your credit cards and it may be difficult to get one in the future.

  • In California, you can't file for Chapter 7 bankruptcy if you had filed chapter 13 within 6 years.

  • Bankruptcy will not seize secured assets such as your car, home, disability assets, luxury assets, wages or retirement accounts.

Works Cited

Amadeo, Kimberly. “How WaMu Went Bankrupt.” The Balance, www.thebalance.com/washington-mutual-how-wamu-went-bankrupt-3305620.

“Understanding Bankruptcy: How to File & Qualifications.” Debt.org, 7 July 2020, www.debt.org/bankruptcy/.

BUS 218/70348

Zyan Carlson

Oct. 10, 2020

Bankruptcy in the United States

Summary

  • Bankruptcy and the economy go hand in hand.
  • As the economy improves, the percentage of bankruptcy cases drop.
  • As a crisis occurs, like the housing crisis, more people and businesses file bankruptcy.

Filing bankruptcy can be a fresh financial start for many individuals.

Your credit score and ability to borrow money will be affected however including buying a house or even renting.

The government allows bankruptcy to give a second chance to people and businesses in order thrive and contribute to the economy.

Myths

  • Bankruptcy eliminates debt

This is not always true, sometimes bankruptcy doesn't eliminate any debt and simply reorganizes it, sometimes a payment plan is put into place but the debt isn't eliminated.

  • Mostly businesses file bankruptcy

Actually, it is mostly individuals that file bankruptcy for themselves.

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