Peoples are borrowing money to fulfill their personal needs, but problem is that.
What happened when someone can’t pay back their debt? What are you going to do?
Before jump into, let’s discuss a couple of words that used a lot. Debtor > this is the person who borrowed the money: On the other side a Creditor > this is the person that is owed the money or they lent the money to the borrower.
The question is, what happened when the debtor can’t pay back the money to the creditor?
In human history, if you go back to ancient Greece, if the debtor can’t pay back their debt, then become a debt slave to the creditor. They do the job for creditor like house cleaning, gardening, cooking, etc.
That’s who Greece handle it if you know it’s kind of shocking to us now, but that was their solution.
In these days it’s a 21 century and there is a lot of solutions to get rid of debt and also brand new start.
Now we only discuss bankruptcy the first version of bankruptcy was similar to debtor’s prisons, but know we have bankruptcy laws and these laws prevent this type of craziness.
Bankruptcy, we only have to focus on bankruptcy in California. In general talk about personal bankruptcy in personal bankruptcy two chapters are included in chapter 7 and chapter 13.
Chapter 7 Bankruptcy: this is also called a straight bankruptcy It seems complicated in simple words it’s not a simple procedure. You file for bankruptcy that you can’t pay back your debt due to some reasons like jobless or other some circumstances. If you have assets then you have to sell it to pay back to the creditor, this whole procedure is done by trustee. But at the end of the day debtor can say that free of all my debt. Its stay on your credit report for ten years.
Debts that are non-dischargeable with chapter 7 bankruptcy are certain types of taxes, student loans, child support, those won’t be forgiven.
Chapter 13 Bankruptcy: this is often referred to as a reorganization. If you have a job or monthly income and take a debt more than your income due to medical emergencies or other, than you are qualified for chapter 13 bankruptcy. In this debt is not get rid of completely but you can set a plan to pay off your debt in 3 to 5 years. This will a little bit of a negotiation if you have $50,000 debt and after negotiation, you owe only $40,000 and interest rate decrease from 20% to 10% a year. It will stay on your credit report for 7 years.From personal bankruptcy point of view Chapter 7 and Chapter 13 are important. If you find out yourself in these circumstances, just for the knowledge you are not alone and the number of bankruptcy filings is increasing gradually. In the United States, chapter 7 bankruptcy filings are in 2008, 2009, 2010 sequentially 419k, 585k, 826k, and chapter 13 bankruptcy filings are 289k, 345k, 381k, both are increasing really fast, but chapter 7 is even more dramatic because in this situation peoples don’t have jobs.