With the current state of the economy, bankruptcy no longer has the same negative connotation it once had. Regular people are continually lining up to file for bankruptcy relief.

There are many reasons why people file for bankruptcy such as:

  • Loss of jobs and chronic unemployment
  • Large or under-water mortgages that cannot be paid
  • Medical problems and corresponding medical expenses

When people come to the realization that their debt load has become unmanageable, they can seek debt relief help in the form of bankruptcy. Generally speaking, there are two forms of bankruptcy that are helpful for consumers who have accumulated substantial debt: chapter 7 and chapter 13 bankruptcy.

Chapter 7 bankruptcy is basically a liquidation of non-protected assets and a distribution of the proceeds to creditors. The goal of a chapter 7 bankruptcy is to obtain a clean slate and start fresh with as little debt as possible. When a person files for chapter 7 bankruptcy, creditors must stop trying to collect on debts. This means that they cannot pursue lawsuits or wage garnishments. Even debt collector phone calls are not allowed.

Chapter 13 bankruptcy is also referred to as a reorganization. Under this form of bankruptcy, the goal is to manage and reorganize a person's debt, while discharging as much of it as possible. An individual will establish a plan to pay off debt over a period of three to five years. After the payment period is over, any debt that is left over is generally discharged. This scenario can help homeowners avoid foreclosure by giving them time to catch up on their payments.

Bankruptcy law is extremely complex, and this general summary is not meant to be exhaustive. Georgia residents who have accumulated substantial debt may want to consider their options and determine whether bankruptcy can help to alleviate some of that burden.

Source: TheTimesNews.com, "Bankruptcy: What you need to know," Michael D. Abernethy, Aug. 27, 2011