| Nearly all personal bankruptcy filings are voluntary. That just means that the bankruptcy filing was initiated by your friend; she was not forced into it by her creditors. (In some cases, creditors can force a bankruptcy in order to cause assets to be liquidated, but this is most often the case with corporations. Rarely would creditors benefit from forcing a personal bankruptcy.) A Chapter 7 bankruptcy means that the person is seeking a court-ordered discharge of certain obligations. The most commonly discharged obligations are credit card balances and any other unsecured loans. With secured obligations, such as mortgages, car loans, and some installment loans, the debtor can be relieved of the debt only if he or she gives up the property on which the money is owed. If the debtor wants to keep the property, the creditor will usually permit him or her to "re-affirm" the obligation and continue making payments. Certain types of obligations such as student loans and court-ordered payments or judgments cannot be discharged through bankruptcy. Bankruptcy puts a huge black mark on a person's credit history, but it is often possible for a recently-bankrupt person to get credit again very soon -- but at much higher than normal interest rates. Sadly, it's very easy for the person to already be again deep in debt just a year or two after filing for bankruptcy protection. While bankruptcy can be a tremendous Godsend to someone who is deep in debt through unfortunate events or circumstances, it can also be misused as an "easy way out" by people who recklessly over-spend. |
