how does bankrupcy work?

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SkinnyJoe

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Pardon my ignorance, but is there a difference in the final outcome whether a person owes 25k or 75k in debt at the time of filing?

Namely, If I help someone over some time (give them money) to help with their debt, and they end up still having to declare bankrupcy, did I essentially throw that money away? If so, would they be wiser to spend that money on something else, and if yes, what?

Thanks.
 
SkinnyJoe said:
Pardon my ignorance, but is there a difference in the final outcome whether a person owes 25k or 75k in debt at the time of filing?

Namely, If I help someone over some time (give them money) to help with their debt, and they end up still having to declare bankrupcy, did I essentially throw that money away? If so, would they be wiser to spend that money on something else, and if yes, what?

Thanks.
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What, for example, would these people spend the money on as an alternative to paying their debts?

If I were giving money to someone who might be on the verge of bankruptcy I would do it knowing that it's a gift since liklihood of repayment is slim.

To answer your question bankruptcy is bankruptcy and is looked upon by credit grantors and credit scoring agencies the same whether it's 25k or 75k.
 
yea... once your bankrupt, no matter how high the debt, you restart at 0.
Depending on how this person deals with their money it's probably best for them to declare bankruptcy too... It can very well be a strategic play with a positive outcome, instead of you giving them money you know you wont see again.

Just my thought, I know someone who just did declare and... well now.. since the debt is clean, They are making new choices and creating better outcomes for themselves without relying on credit..
 
I know a man who declared bankruptcy, and like many others, just continued to spend what he didn't have.

That's very common, unfortunately.
 
SkinnyJoe said:
Pardon my ignorance, but is there a difference in the final outcome whether a person owes 25k or 75k in debt at the time of filing?

Namely, If I help someone over some time (give them money) to help with their debt, and they end up still having to declare bankrupcy, did I essentially throw that money away? If so, would they be wiser to spend that money on something else, and if yes, what?

Thanks.
Click to expand...


You have several types of Bankruptcy.

Chapter 7. You give back everything and don't have to pay anything but lawyer fees.

Chapter 11. essentially a restructuring of debt. collections stop. interest is
taken away and you only pay on principle so much of each debt for an alotted number of years. Certain debts are wiped out (mostly unsecured stuff).

Chapter 13. [can't remember what this one is]

You go see a lawyer and he pretty much decides what's best for you to file. You pay him the filing fee. Then you go to bankruptcy court where there's a [i forget what they're called] who asks you why you're filing, what you're filing on, etc...

These days there's a median family income per state that is a guideline on whether or not you have to pay so much of your debt back when you file.

Make your payments every month and at the end of alotted time your bankruptcy is complete. It stays on your credit report for 10 years.

...And yes, you threw away money.


Bankruptcy got a stigma because people abused it....like so many other things.
I knew a guy who doubled the paycheck of both my wife and I combined, who went spend crazy then started paying off debt with debt, then filed bankruptcy...like so many others who've abused the system.

From what I hear, bankruptcy is not an easy life. The payments of Chapter 11can be expensive, plus it rips your credit to shreds. However, sometimes it's the only way out.
 
Point him to a debt counselor. Give that a shot before bankruptcy. Sometimes they can manage essentially the same sort of thing that Chapter 11 does. Creditors would much rather have you paying them something than nothing at all.
 
KEmSAT-Survival said:
You have several types of Bankruptcy.

Chapter 7. You give back everything and don't have to pay anything but lawyer fees.

Chapter 11. essentially a restructuring of debt. collections stop. interest is
taken away and you only pay on principle so much of each debt for an alotted number of years. Certain debts are wiped out (mostly unsecured stuff).

Chapter 13. [can't remember what this one is]

You go see a lawyer and he pretty much decides what's best for you to file. You pay him the filing fee. Then you go to bankruptcy court where there's a [i forget what they're called] who asks you why you're filing, what you're filing on, etc...

These days there's a median family income per state that is a guideline on whether or not you have to pay so much of your debt back when you file.

Make your payments every month and at the end of alotted time your bankruptcy is complete. It stays on your credit report for 10 years.
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Chapter 11 is generally used for commercial/business restructuring, not applicable to individuals. What you describe as an 11 is basically a 13,
but for individuals, which is where you actually pay creditors back, just under more favorable terms to the debtor. The stay applies here as well, the length of which is subject to several factors including amount of previous filings, if any, debtor's compliance with the payback plan, the motivation of the secured creditors attorneys to move to shorten, or avoid it to pursue foreclosure/repo actions depending on the cirucmstances etc... its not just a given that your protected while you are in bankruptcy.

Debt counseling is part of the filing process, you cannot petition the court for bankruptcy without proving you have undergone some type of credit counseling.

...And yes, you threw away money.
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+1
 
Thanks for the advice. I am going to keep giving them money, hoping they never have to file for b. More than anything, bankruptcy strips you of your dignity.
 
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