Bankruptcy Filings on Decline But Many Still Need Bankruptcy Protection

August 31, 2012

If bankruptcy filings are an indicator, good economic news may be on the way. The number of personal and business bankruptcies in the United States has been falling this year, and if the same pattern continues the number of bankruptcies will approach the level filed before the Great Recession. During the first half of the year, 601,184 personal bankruptcies were filed, which is a 13 percent decline in comparison to the same time period last year. If the rate continues, the number of personal bankruptcy filings at the end of 2012 could be at the lowest level since before the 2008 financial crisis and recession. An official at the American Bankruptcy Institute believes the decline can partly be explained by the historically low interest rate set by the Federal Reserve.

Even though there has been a drop in the number of bankruptcy filings among individuals, many folks continue to struggle. For those whose debt burdens are too heavy, personal bankruptcy provides the chance to start over. Bankruptcy offers consumers many protections including:
-Discharge of most debts
-Protection of property and income from seizure by creditors
-Tools to modify secured debts
-Automatic stay

The main purpose of bankruptcy is to discharge most unsecured debts, such as credit card debt. A bankruptcy discharge eliminates any personal obligation to repay many types of debt. Some types of debts are not dischargeable, such as child support payments, alimony, student debt and some taxes. Also, if a creditor has a lien on property used as collateral for a loan, the debt may still have to be paid after bankruptcy to keep the property.

Bankruptcy also provides protection of property and income from unsecured creditors, and is often the best tool to protect a debtor's property from unsecured creditors. Certain properties are subject to exemption in bankruptcy. Exemption means the property is not subject to sale during the bankruptcy process to pay creditors. Bankruptcy can also help prevent the garnishment of wages or other income. The cessation of garnishment may help protect an individual's job if the individual's employer does not look kindly upon wage garnishments. Attempts to reduce public benefits, such as Social Security, through garnishment can also be prevented by filing for bankruptcy.

Bankruptcy also provides options to modify or eliminate secured debts. A secured debt is debt guaranteed by a right to the debtor's property called a lien. The discharge of debt in bankruptcy may not eliminate a lien, but other provisions may reduce or eliminate the lien in some cases. Through a Chapter 13 bankruptcy, payments on secured debt can be lowered, and the past due amount can be paid off according to a court-approved payment plan. These options may help an individual keep a car or house.

Finally, personal bankruptcy offers the protection of automatic stay. The stay is an automatic court order that goes into effect immediately upon filing the bankruptcy petition and prohibits collection efforts. An automatic stay therefore stops creditor actions like repossessions, evictions, foreclosures, utility shutoffs, and garnishments.

If you are struggling with an overwhelming amount of debt or are facing creditor harassment, contact an experienced bankruptcy attorney to discuss your legal options.

Article provided by Allan R. Bloomfield
Visit us at http://www.bloomfieldlaw.com/