How
Bankruptcy
Works
by:
John
Mussi
Bankruptcy…
a
frightening
word
with
serious
connotations.
In
recent
years
governments
have
been
cracking
down,
making
penalties
for
bankruptcy
more
severe
in
an
attempt
to
make
them
more
difficult
to
attain
so
that
only
those
in
serious
need
can
apply
for
them.
Despite
the
negative
image
that
is
associated
with
bankruptcy
and
the
various
problems
that
come
along
with
declaring
a
bankruptcy,
it
doesn't
have
to
be
frightening;
after
all,
bankruptcy
was
designed
as a
way
for
those
individuals
and
businesses
who
find
that
their
finances
are
out
of
control
to
get
the
help
that
they
need
to
organize
their
finances
and
pay
off
their
debts.
Once
you
take
the
time
to
understand
what
bankruptcy
is
and
how
it
works,
you
won't
find
it
as
scary
as
you
did
at
first.
Defining
Bankruptcy
Bankruptcy
is a
legal
term,
meaning
that
an
individual
cannot
within
reason
pay
off
their
various
debts
and
have
allowed
the
court
system
to
take
over
their
finances
for
this
purpose.
When
filing
for
bankruptcy,
the
court
will
appoint
someone
to
work
out
the
payments
to
your
creditors
and
to
determine
how
much
of
your
income
must
go
to
repay
these
debts.
The
court
will
either
allow
you
to
make
payments,
or
more
likely
will
deduct
a
portion
of
your
paycheck
toward
this
goal.
During
this
time,
your
credit
will
be
limited…
both
by
legal
action
and
by
the
reluctance
of
creditors
to
issue
credit
lines
to
individuals
who
have
declared
bankruptcy.
Once
the
total
amount
set
by
the
court
has
been
repaid,
the
bankruptcy
will
be
discharged
and
you
will
be
able
to
start
rebuilding
your
credit
from
the
ground
up.
Different
Types
of
Bankruptcy
Several
different
types
of
bankruptcy
exist,
defined
by
legal
codes
for
certain
purposes.
The
exact
types
of
bankruptcy
available
differ
from
one
country
to
the
next…
in
the
United
Kingdom
bankruptcy
can
only
legally
be
applied
to
individuals
and
partnerships,
whereas
in
other
countries
such
as
the
United
States
or
Canada
they
can
be
applied
to
businesses
as
well.
Regardless
of
the
limitations
or
allowances
set
by
the
government
on
who
is
allowed
to
declare
bankruptcy,
the
general
purpose
of
bankruptcy
remains
the
same.
Lasting
Effects
of
Bankruptcy
While
you
are
working
towards
discharging
a
bankruptcy,
your
options
for
credit
will
be
exceedingly
limited.
Even
after
you've
had
your
bankruptcy
filing
discharged,
though,
you'll
still
find
that
you
won't
have
many
options
for
a
while…
many
creditors
will
still
be
hesitant
to
work
with
you
from
between
six
months
to
two
years
depending
upon
the
creditor
and
the
service
that
you're
applying
for.
You
should
also
take
care
with
any
offers
that
you
do
receive,
because
they
will
likely
come
with
high
interest
rates
and
additional
fees
attached.
Life
After
Bankruptcy
Bankruptcy
isn't
the
end
of
the
world…
it's
actually
a
chance
for
a
new
beginning.
As
time
goes
by,
the
bankruptcy
on
your
credit
report
will
begin
to
matter
less
and
less
as
you
eventually
start
to
establish
new
positive
credit
lines
and
build
up
your
credit
again.
Just
like
negative
reports,
your
bankruptcy
will
eventually
expire
from
your
credit
history;
the
process
may
take
up
to
seven
years,
and
until
it
expires
there
will
still
be
those
who
are
hesitant
to
deal
with
you.
Once
it
expires,
however,
the
negative
reports
that
preceded
it
will
also
be
long
gone…
and
you'll
find
that
your
newer
reports
are
all
that
remain.
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