Bankruptcy

What is Bankruptcy?

Bankruptcy is a legal procedure by which consumers (and businesses) can eliminate their debts or repay them under the protection and supervision of the court. The Bankruptcy Code is a federal statute that was enacted in 1978 and has been amended on several occasions. The most fundamental changes occurred through the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). The majority of amendments enacted through BAPCPA became effective on October 17, 2005.

While bankruptcy was created to give a hopeless debtor a fresh start it should always be considered the absolute last resort for solving financial problems. A decision to file for bankruptcy is a serious step. Bankruptcies are typically reported to the credit bureaus and will stay on your credit report for up to 10 years, possibly affecting your ability buy or rent a home. Although you may be able to obtain credit after a bankruptcy you will likely pay much higher interest rates and fees. In addition, not all of your debt may be eliminated as bankruptcy usually does not exempt you from child support payments, alimony, fines, taxes, and some student loan obligations.