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Bankruptcy Laws: How They Protect You

There are times in some people's lives when life throws a curve ball and finances become overburdened and almost impossible to deal with. Credit card debt, automobile loans, mortgages and other miscellaneous debts begin to pile up. The decision to file one of the bankruptcies becomes a pressing issue in the mind. The decision to file a bankruptcy should not be taken lightly. It is not a way out for an individual just looking to get away from paying obligations simply because they choose not to. It is a legal action that is undertaken and will remain on credit reports for years.

The bankruptcy process begins with a petition to either the Supreme Court or a county court near you. Your petition is then slotted in to the hearing schedule for the Court.

The judge at your hearing has the following choices:

1. They can decide to hold off on making a decision until they receive further information about whether a bankruptcy order is the best course of action.

2. Reject the petition. The main reason this is likely to happen is where a judge deems an administration order would be a better fit.

3. The judge may decide that you would be better undertaking an Individual Voluntary Arrangement (IVA) and decides to appoint an Insolvency Practitioner to supervise this set up. The court would only recommend this if you had assets worth more than £2,000; you have under £20,000 in unsecured debts; and you haven't been bankrupt or made an IVA in the last 5 years. You can also advise the court is this isn't a course of action you want to take.

4. Make a bankruptcy order. If this is the case then you are considered bankrupt from the time the order is made by the Court.

As well as a bankruptcy order, the Court can also issue a certificate of summary administration. This only happens where you have under $20,000 in unsecured debts and you haven't been bankrupt in the previous five years or made an arrangement with creditors. The main benefit of this certificate is that it makes administering your bankruptcy simpler and faster.

Bankruptcy laws also prohibit certain types of behavior from creditors and collection agencies. These are a list of rules and regulations that prevent collectors from harassing individuals. One provision in bankruptcy laws prevents creditors, after bankruptcy proceedings have been initiated, to contact the individual again directly regarding the debt.

Many debt collectors use shady or harassing tactics in order to collect a debt. They get a percentage of the collection so they use any means necessary to coerce the debtor into paying. Thankfully bankruptcy laws have been passed to limit their ability and tactics used in collecting debts. Once the attorney has petitioned the court for bankruptcy, the collectors must go through legal channels.

The need for credit is all around us. It influences every part of our lives from purchasing a new house to obtaining a new job. Those three numbers ranking our credit can make a huge difference in the quality of life. There is not a single bankruptcy that does not leave some sort of black mark on that credit score. It is for this reason that bankruptcy attorneys instruct their clients to be informed and to be sure before they make that decision.