FYI: Personal Insolvency Proceedings

If you've reached the bottom of the financial barrel and are now scratching your way up, filing for bankruptcy should serve as a wake-up call. There are at least 1.5 million people in the same boat as you if you believe that misery loves company; that's the number of people who filed for bankruptcy in the United States in the last year. Overcommitting oneself is easy to do, and unfortunately, many people do it for more reasons than I care to list.

The wealthy are just as likely to file for bankruptcy as the poor or middle class. Some well-known people, such as Donald Trump, have fallen into and climbed out of the hole. Kim Basinger in 1990, Burt Reynolds in 1993, Rembrandt in 1996, and John Travolta in 1656 all have filing dates. Regarding the final one, I can't say for sure whether or not he has given up trying to escape or not.

People who couldn't pay their debts were once executed (but not in the United States) or sent to debtors' jail. The government has not only made it illegal to engage in such cruel practices but has also enacted legislation to ensure our safety.

  

Title 2 of the United States Code (11 U.S.C. 101–1330) contains the bankruptcy code, which was enacted to protect the rights of individuals and businesses while facing debt collectors, with the final say resting with the bankruptcy courts. Secured debt and unsecured debt are the two main categories of debt. When a debt is "secured," the lender has legal rights to seize an asset (such as a car, yacht, or home) in the event that the debtor fails to make payments. 

In contrast, an unsecured loan means that the lender has no collateral to back up their loan. If the debt is not paid, the creditor will turn to a collection agency, which will harass you at all hours of the day and night. Also, be wary of unsecured debt, as a creditor with a high balance may seek a court order authorizing a lien on your property. Nobody may now get up and leave town to avoid paying off debts by selling their home.

You or anyone you know who has fallen behind on payments should read this. Since 1997, the government has intervened to prevent debt collectors and collection companies from employing illegal and immoral collection techniques, such as contacting debtors in the middle of the night and making threats. Collection agencies are required to adhere to regulations set forth in the Fair Debt Collection Practices Act (FDCPA). Collectors are obligated to conduct the following:

If you've been asked to stop receiving calls and you've disputed the debt in writing, the calls should stop. A letter detailing the debt and the creditor must be sent to you within 5 days of the initial contact.

The collection agency must stop contacting you until the creditor responds to your inquiry if you wish to contest all or a portion of the debt. If the collection agency decides to sue you for the debt on the creditor's behalf, they must serve you with a summons in the county where you currently reside or where the contract was originally signed.

Don't panic if a creditor threatens to sue you; such a tactic is commonly used to coerce debtors into making payments.

Collection agencies are prohibited from engaging in many practices, including but not limited to the following, by the Fair Debt Collection Practices Act (FDCPA): calling you at work, implying that they may be working with the federal government. *calling your friends or family *implying that you may go to jail *garnishing your paychecks *unless the debt holder plans to do it *calling your friends or family members

Our government, in its infinite wisdom, determined long ago that if they incarcerated everyone, the chances of them paying back any debt to any creditor would be nil. You've probably heard of wage garnishment, the legal process by which a debtor's creditors are allowed to withhold a portion of their paycheck pending full payment of the debt. In areas where income garnishment is legal, this is standard procedure, and you may want to consult a lawyer if it happens to you. Did you know that the IRS and any educational institutions you owe money to do not require a court order to garnish your wages? You can be sure that your tax returns won't be safe from being stolen.

  

If you have a store debt (store credit card, personal check, or payment plan) and need to return large items like furniture or appliances, the retailer cannot enter your home without a court order. True enough.  They can come back and take it if you let them in without a warrant. Since they would have to acquire a court order and pay someone to enforce it, reclaiming property is often not worth the trouble. A secondhand object that has been soiled or damaged may be more difficult to sell. Finally, it's important to keep in mind that if you don't pay your mortgage or auto loan, the lender has every right to take back the collateral. Since there is typically a substantial sum at stake, you should prioritize making these payments to your creditors.