What is Bankruptcy?

by Douglas Jacobs, California Bankruptcy Attorney

The term “bankruptcy,” according to Webster, means either “: the quality or state of being bankrupt or utter failure or impoverishment.”   In today’s modern parlance, to be bankrupt means you don’t have the money to pay your debts.

To file bankruptcy then is to accept that you can’t pay your debts and to take action to move forward by getting a “fresh start.”

Legally, Bankruptcy is actually a Federal program that allows companies or individuals (including married couples) to obtain a “fresh start” by reorganizing or discharging their debts.

For consumers, the two most common types of bankruptcies are Chapter 7s and Chapter 13s.  A chapter 7 bankruptcy generally wipes out or “discharges” your unsecured debts such as credit card bills, medical bills, etc.  A chapter 13 bankruptcy is a method of reorganizing or structuring your debts to allow you to discharge what you can and get caught up on debts that you want or need to keep paying, such as house payments, tax obligations, etc.

The theory behind bankruptcy starts with the basic concept that one shouldn’t spend the rest of their life trying to pay off a debt that they’ll never be able to be rid of.  Even without today’s egregious interest rates, a loss of employment or significant illness can create such a situation.

Bankruptcy is as old as when people first started lending money or commodities to each other.  Deuteronomy talks of forgiving one’s neighbor’s debts every 7 years, and there are numerous other biblical references to such a concept.

So, you should consider filing bankruptcy if:

1.    Your debts are overwhelming you and you see no way to pay them off in the next two years;
2.    You are behind in your house payment or a tax obligation and you see no way to get caught up; or
3.    You have just lost your job or recovered from a serious illness and don’t know how you will be able to pay your bills.

If any of these apply, consult a competent bankruptcy attorney in your area.

 

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Bankruptcy is Like Spring

How can bankruptcy be like spring? Springtime is a renewal…a rejuvenation. New life is born in spring.  Spring provides rekindled hope and a fresh start.  So it is when you file bankruptcy.

Pulling weeds this weekend that were ignored since last summer I got to thinking about how my bankruptcy clients are clearing out the debris surrounding their financial mess. An ancient proverb tells us that “a good garden may have some weeds”. So it is with a family’s financial situation. Often there is a firm base, or a great potential but they are covered by a great mess of bills and debt.

In the garden, when I discover something promising, I weed around it so it has a chance to grow and spread. That’s what bankruptcy does for households that have hopes and plans but can’t seem to get past the overwhelming financial weeds. But through careful cultivation, in the garden and in life, you can renew your hope, begin new life, become rejuvenated and get a fresh start.

Compared to weeding though, bankruptcy provides a more permanent solution.  Like many people facing overwheling debt, I didn’t look forward to doing the job I had put off for so long.  But I knew that the weeds I pulled out of my garden would allow my plants to get a good strong start.  I also know that they will grow back or be replaced by new weeds if I don’t keep up the weeding. This is different than a bankruptcy, because if a petition is filed properly, with the help of an experienced bankruptcy attorney, even those financial weeds with the deepest roots will be completely removed.  By taking proper care not to fall into the same patterns, they will have been removed forever.

Ah, spring! What are you waiting for?

 

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