Business & Finance Bankruptcy

Filing Bankruptcy Defined in 2013

According to Webster's dictionary it means the quality or state of being bankrupt or utter failure or impoverishment.
In today's terms, you don't have enough money to make ends meet.
In today's society many people who face bankruptcy is because of living way beyond their means.
We've seen a large amount of this going on between 2000 and 2007.
The creditors were pushing money out for people to spend like drunken sailors.
They would loan money to someone's dog to buy a house.
There were no checks and balances and many Americans jumped on the bandwagon and overindulged.
Now it's time to pay the bill and the person is bankrupt.
In 2007, the financial markets virtually collapsed sending every bank into a frenzy looking to cut their liabilities.
Consequently, most banks eliminated available balances on credit lines and credit cards alike.
People that were living on credit were all of a sudden forced to face the music.
This sent millions of Americans into bankruptcy to stop the aggressive creditors.
Just when we thought these mistakes were behind us, quantitative easing was pushed through by the Fed and now the creditors are once again pushing out cash to the consumer.
No one really knows how all this will end, but if history repeats itself, it won't be good for any of us.
When someone decides to file bankruptcy they are accepting the fact that they cannot afford to pay their bills and they want to take legal action to get a fresh start.
In the corporate world, it's more of a do over because the company got themselves in a bad contract with their employees or one of their vendors.
Corporations use bankruptcy filing to reorganize and discharge their debts.
Many companies come out of this process being lean, mean and profitable.
I don't think this is what Congress intended when they created bankruptcy.
The intention was to give good hard-working Americans a fresh start when they fall on hard times.
The idea for companies was to be able to get out of debt from making a bad business move or bring a product to market that failed.
A capitalistic society wouldn't work without having bankruptcy available as entrepreneurs would not take the risk to bring their inventions to market.
The risk would be too high if there was a debtor's prison.
In 2005, the credit industry lobbied Congress to make major changes to the bankruptcy code.
At that time, Congress was told that there were too many people filing bankruptcy that were capable of repaying at least a portion of their debt.
Congress added a means test, that basically would qualify an individual to file, along with pre-bankruptcy credit counseling and post-Bankruptcy financial management courses.
It didn't make it impossible, but it made it much harder for someone to file Chapter 7 bankruptcy.
But with the US debt close a $17 trillion and 101 million Americans now receiving food stamps, it is just a matter of time before the number of those filing bankruptcy once again takes off.

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