1. The Essentials of Bankruptcy Law
According to a comprehensive, careful study by Harvard University researchers, over half of all
bankruptcies in the United States are the result of overwhelming medical expenses. In their
study, researchers found that over 1.5 million families had sought the bankruptcy court's
protection because their insurance did not cover the costs of serious medical treatment, and they
could not pay the bills from their own resources. The same study found that extended
unemployment ranked as the second leading cause of bankruptcy, and researchers noted that,
since the serious recession began, the rates of those filings have increased more than 50%.
Bankers and financial planners emphasize the seriousness of declaring bankruptcy, stressing that
you should consider it your last resort. If, for example, you have fallen behind on your house
payments and fear foreclosure, you carefully should consider federally guaranteed mortgage
refinancing or loan modification; Congress and the administration now have approved three
different mortgage relief programs, and more than ten million families qualify. Similarly, if you
have accumulated a great deal of credit card debt, qualified professional credit counselors may
help you renegotiate your obligations and satisfy your creditors without severe damage to your
credit rating. Moreover, if you owe a great deal of money in back taxes, an attorney or enrolled
agent may help you submit an "Offer in Compromise," which will reduce your indebtedness to
the IRS or your state tax authority.
If, however, your debts have gone so far beyond your capacity to pay that you stand in jeopardy
of losing everything, then bankruptcy will help you protect your assets and start over again with
a clean slate. Learn the bankruptcy laws so that you may choose wisely as you complete the
process. Most importantly, you must know which kind of relief you seek: one of the chapters in
the bankruptcy law requires you to liquidate your assets for the sake of paying off your debts; the
other allows you to restructure your debts and retain most of your major property. An attorney
will help you understand the subtleties and intricacies in the bankruptcy laws.