Learn the Lingo of Bankruptcy

Most of us have a vague idea of bankruptcy as a process to somehow erase debts or reorganize the repayment of debts.  We have heard the phrase “file for bankruptcy” all of our adult lives, but where does one do it?  At the post office?  The bank?  Social services?

Until you have the unfortunate need to familiarize yourself with terms like “liquidate” and “bankruptcy discharge,” they mean very little.  A person entering the bankruptcy process, however, must become educated before entering the treacherous waters of the courts.  A bankruptcy discharge is the end result; it is the release from personal liability in certain types of debts.  The time a bankruptcy discharge goes into effect varies with each type of bankruptcy and the amount of time under which any repayments will be made to your creditors.

 

A bankruptcy discharge is basically a permanent order to creditors not to take any collection action on the enumerated discharged debts.  They may take no legal action against you, and no personal contact whatsoever is to be made, not even by mail.  To obtain a bankruptcy discharge now requires the debtor to take bankruptcy education and receive a certificate.  This new requirement is part of the Bankruptcy Reform Bill that went into effect in October 2005.  Bankruptcy education is basically a short personal finance course teaching the basics needed to avoid financial pitfalls in the future.

 

There are certain types of debts that a bankruptcy discharge will not cover.  Some debts must be paid no matter what type of bankruptcy you file.  A bankruptcy discharge will not effect most student loans, traffic fines, tax bills, debts incurred in D.U.I. suits, child support or alimony payments.  Any debt you omit when filing for bankruptcy must be satisfied.  Also,  credit card incurred in the couple of months prior to filing and any “luxury” purchases for a certain period after filing, must usually be paid in full.

 

A bankruptcy discharge provides relief from harassment by creditors.  It is also the a chance to start over and begin building up a better credit report.  Be aware that a bankruptcy will stay on your record many years, but when it comes off it will be nice to have a clean record.  

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