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Debtor’s rights and second chances

Before the first bankruptcy laws were enacted, a debtor who was not able to pay creditors found themselves imprisoned until they did. Often the jailors in these debtor’s prisons charged inmates for food and other essential items at exorbitant rates. The debtor who did manage to pay his creditors often remained in prison because they could not pay off the jailors. Thankfully, society has come a long way since then.

Federal Standardization
Early efforts in the United States to regulate bankruptcy laws began in the 1800s resulting in the federal bankruptcy laws enacted today. These laws sought to create uniformity in the law, provide protection for the debtor, and give the debtor an opportunity for a new start.

The Burden of Debt
When confronted by an inability to pay debt caused by unforeseen circumstances, the debtor can avail themselves of these standardized laws to find relief. By utilizing protections provided under the federal law, even debtor’s who fall victim to poor investment decisions can find a place for a foothold as they regroup.

Sickness
A critically ill family member can quickly amass a small fortune in medical bills. Those with insurance may still owe thousands of dollars in medical bills without the money to pay.

Divorce
For most couples, it takes two incomes to run a household. When a couple decides to divorce, common debts that were manageable while married may be dependent on one income to repay.

Long term illness
Nothing is more devastating than long term sickness particularly when applied to the primary wage earner in the family. When the insurance runs out, the family must face overwhelming debt without means to pay.

High interest debt
Credit cards and other high interest loans are usually easy to obtain and quickly become difficult to repay. The offer of quick cash often comes at a high price.

Job loss
Whether it is because of a poor economy or other reasons, the wage earner may find themselves out of work. Depending on a number of factors, the wage earner may not be able to find work for an extended period.

Increased responsibilities
As more people find themselves out of work, someone who still has an income may find themselves providing for an extended family.

Federal bankruptcy laws fall under the following categories:

  • Chapter 7 — liquidation of assets
  • Chapter 9 — insolvent towns or cities
  • Chapter 11 — a restructure for business and corporations
  • Chapter 12 — for aquaculture or agricultural family businesses
  • Chapter 13 — debt adjustment for an individual
  • Chapter 15 — other types of bankruptcy including cross-border cases

When contemplating bankruptcy, start by finding an expert in bankruptcy law for advice. Each state has input into some aspects of property distribution under the standardized federal bankruptcy laws. The debtor should seek an attorney who can guide the debtor to the appropriate bankruptcy route. A knowledgeable bankruptcy attorney will protect the debtor from creditors, and assist the debtor to a fresh start.

Tom Clark is a freelance writer, professional blogger,and social media enthusiast. His blog Changeofaddress.org focuses on internet service providers.

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