Why Is Filing Bankruptcy Good For Corporations And Bad For Us?
In the past, filing bankruptcy always carried a stigma associated with failure. While many individuals believe people who file for bankruptcy are losers, when a multimillion dollar corporation does it they come out winners and believe it’s a great idea. It’s interesting how it’s perceived differently for some. When a CEO of a big corporation wants to downsize or eliminate a union contract, they will enter a bankruptcy filing for re-organization. Typically, they will file a Chapter 11 bankruptcy, that will allow them to negotiate lower balances with their vendors and even eliminate employee contracts that are saddling the company. Usually they will leave a bankruptcy filing being leaner and meaner than before.
On the other hand, when the average Joe decides filing bankruptcy is his way out of debt, he will have to make sure that he uses a bankruptcy attorney that is familiar with this type of case to protect as much property as possible through the bankruptcy exemption laws. In the case of a personal bankruptcy, if average Joe leaves anything unprotected there is a possibility that the bankruptcy trustee can take it to disperse it to the creditors. After Joe gets his bankruptcy discharge, he will have trouble getting credit for a couple years as he has to regain the trust of the creditors he filed bankruptcy on.
Filing For Bankruptcy To Stop Creditors In Their Tracks
Because of the tough economic climate, many people are considering filing bankruptcy. One of the greatest advantages of filing for bankruptcy, besides getting your financial life back in order, is that it will stop those aggressive creditors in their tracks. Yes it is true, when an individual files for bankruptcy their creditors must stop calling them. They must stop garnishing the debtor’s wages, they must stop any law suits or judgments, repossessions, foreclosure proceedings, and all contact with the debtor. In a nutshell, the creditors must stop everything they are doing to collect on the debt or take property from the debtor. This is possible because when filing bankruptcy, the debtor receives the benefit of the automatic stay. The automatic stay is a powerful legal tool that goes into effect the moment the case is filed with the court and prohibits creditors from contacting or taking any actions against the debtor.
There are a few exceptions to the automatic stay, which mostly includes matters of police power or marital obligations such as domestic or child support. For most people however, the bankruptcy filing with its automatic stay provides real relief and a chance to take a deep breath and evaluate their financial situation without the constant pressure from harassing creditors.
After filing bankruptcy, if creditors continue to call the debtor, bother them, garnish their wages, or take any other action against them, the debtor should contact their bankruptcy lawyer immediately. Creditors in violation of the automatic stay can face harsh penalties and fines from the court. However, if the creditors acted innocently without knowing about the bankruptcy case, then you can inform them of the bankruptcy filing as well as the case number and they must stop all contact at that point. If on the other hand, the creditors acted willfully, having knowledge of the bankruptcy case, not only can the bankruptcy lawyer make them stop, but the lawyer can ask the bankruptcy court to award actual as well as punitive damages and legal fees to the debtor.
Start Out The New Year By Filing For Bankruptcy
As we usher in 2012, the bad financial decisions we made in 2011 will quickly become a lingering memory. Looking back to New Year’s one year ago, I remember all the talk of how people were going to get out of debt for their New Year’s resolution. One year later, it seems nothing has changed and according to the statistics Americans are going the wrong way. Credit card debt is now at an alarming $15,799 per American. With only 300 million people living in the United States it blows me away to learn that there are over 609 million credit cards held by US consumers. Considering age and ability to pay this would factor down to six credit cards being held per American. Over the last years, all the talk about getting the US debt under control and the US consumers, that control just went out the window. With these new numbers it’s obvious that the US is going to see record numbers of Americans filing for bankruptcy. Since the changes to the bankruptcy code back in 2005, at first we saw a drop as expected and from 2006 on the numbers of those filing bankruptcy has continuously risen until 2011 where it went flat. This last year has perplexed many experts because the numbers say bankruptcy filing and yet we will probably finish out the year with 1.5 million bankruptcies filed, a little lower than 2010.
Is Bankruptcy Filing Better Than Debt Settlement?
With the New Year quickly approaching, Americans can expect to be bombarded by phone calls from debt settlement companies offering them a way out of debt. Because bankruptcy filing carried a negative stigma in the past, most people try to opt out and look for an alternative to bankruptcy. These folks are prime targets for the debt settlement industry. A lot of the negative press about those filing bankruptcy, comes from the credit industry and the debt settlement companies. The majority of what they call facts are only partial truths at best. Looking at it from their standpoint, they believe if they can scare people into not filing bankruptcy that is all the more money that they will get paid back. What they don’t want the individual to know is if they file Chapter 7 bankruptcy they will get nothing, nada, zip. This is why many debt collection companies get militant when they know that debtor is on their last leg. The sad thing is, they know this individual could not afford to pay them anything and yet they would rather see little Johnny go without dinner just so they can squeeze another dime out of this broke individual.
Why debt settlement is touted as being better than a bankruptcy filing is because they say that they can settle all your debts for pennies on the dollar without having to file for bankruptcy. The problem is they can’t promise anything because the creditors are holding all the cards. How debt settlement works is they have the debtor make payments to the company to build up a pot of money for them to negotiate with the individual’s creditors. Since the creditors hold the cards and the debtor is giving the money to the debt settlement company instead of the creditors they have the option of suing the debtor. Now that the credit card is in default, the interest rates and late fees go through the roof. If the creditor sues the debtor and gets a judgment, the creditor will be able to garnish their wages and attach any property that the debtor owns.