Most people perceive bankruptcy as the ultimate life failure. Unfortunately, for millions of U.S. citizens, it is the last alternative available to save their worldly possessions. Personal bankruptcy can stir up many emotions and leave people feeling ashamed. Worse yet, it can leave a financial black mark on credit reports for ten long years.

Before filing personal bankruptcy, it is important to seek out alternatives to determine if better financial options exist. Sometimes, debt consolidation, debt settlement, credit counseling and budgeting can achieve the same results without the credit chaos associated with bankruptcy.

If bankruptcy alternatives cannot solve financial problems, debtors should take time to become informed about the bankruptcy process. New bankruptcy laws enacted in 2005 have made filing considerably more difficult and expensive. Debtors are required to undergo credit counseling from an approved U.S. Trustee agency and undergo the ‘means’ test to determine the amount of debt to be repaid.

The Bankruptcy Abuse Prevention and Consumer Protection Act was implemented to help consumers from subprime lending tactics and to protect creditors from people who were abusing the system by filing bankruptcy to write off frivolous credit card expenses. BAPCPA provisions require all Americans filing for personal bankruptcy to pay back at least a portion of their debts.

Six bankruptcy chapters exist including: Chapter 7, 9, 11, 12, 13 and 15. Personal bankruptcy falls under either Chapter 7 or Chapter 13.

Chapter 7 is often referred to as ‘liquidation bankruptcy’ because debtors are required to turn over non-exempt property to a bankruptcy trustee. The Trustee supervises the sale of property and funds are used to pay outstanding creditor debts. Remaining balances are written-off and debtors have a clean financial slate.

Under chapter 13 bankruptcy, debtors are allowed to retain their property, including automobiles and real estate. However, a repayment plan must be submitted to the bankruptcy judge for approval.

Chapter 13 payments generally extend for two to three years and can place significant financial restraints on debtors. One unexpected expense can cause debtors to fail out of bankruptcy. When this occurs, debtors lose court protection and creditors can commence with collection actions.

Bankruptcy is governed under federal law. However, each state establishes bankruptcy policies. If planning to file bankruptcy you will need to adhere to the laws of your state. Petitions must be submitted to the district where you reside and approved by a bankruptcy judge.

When possible, attempt to obtain a repayment plan with creditors and avoid filing chapter 13 bankruptcy. Depending on the circumstances, creditors might reduce outstanding balances or interest rates. Increase your chance of successful negotiations by offering an upfront cash payment and reasonable repayment plan.

If bankruptcy is the only feasible option, retain the services of bankruptcy attorneys well-versed in state and federal laws. Doing so ensures proper documents are filed and improves your chances of having the bankruptcy court approve your petition.

From time to time I come across age pensioners whose life is now miserable because they’ve found themselves with what is to them, overwhelming credit card and other debt. On a pension, unless they leave themselves short, they often find that can’t make the repayments.

When talking to me, some of them have broken down and cried when they have realized that, with dignity, bankruptcy can cancel this debt and release them from this dreadful position.

They mostly don’t know that their bankruptcy will last for only 3 years.

They all say that they didn’t know that as a bankrupt, by law they can (each) earn a minimum $758.80 a week net, that’s after tax, that’s weekly spending money, before any of it can be taken off them by their bankruptcy trustee.

Mostly, to a man or woman they tell me that they don’t earn that much anyway. But it’s true, it’s the law, and it changes (upward) every March and September.

A single age pensioner receiving a maximum pension of $537.70 per fortnight, which is $268.80 per week, is way below this $758.80 per week figure.

As a couple they can receive $449.10 age pension per fortnight, so that’s 224.55 each per week, still way below the $758.80 each figure, and keep the lot.

What this means is that if an age pensioner (who rents) goes bankrupt, they can stop paying their debts like credit card and most other loans like that forever, and so keep the full amount of their pension to buy food, and to live on.

If you’ve got property like a house or a car I’ll come to that shortly.

Most however feel that that’s not right, that they were brought up in the era where you had to pay your debts. But that era also required the banks and other lenders to act more responsibly in deciding who to lend money to, and how much, than is the case today.

There seems to be a lack of balance in responsibility now.

If you feel that despite everything you don’t want to go bankrupt, well, bankruptcy law has attempted to provide a solution there too. In reality the solution is generally out of the reach of people living off an age pension, and maybe a few extra dollars too.

In bankruptcy law terms, these solutions are either called a Debt Agreement Proposal, or there’s a Personal Insolvency Agreement. For age pensioners, both could be a bit expensive to set up. They also mostly seem to keep you still saddled with your debt, and a repayment regime spreading over a number of years, and coming out of your pension still.

In addition, with the Personal Insolvency Agreement procedures, (but not a bankruptcy) the fact that you’re attempting to come to some arrangement to pay off your debt like this has to be advertised in both a local and national newspaper.

I can’t see many pensioners, or anybody else for that matter, wanting to be shamed in this way, nor do I think that they should be.

Furthermore, with both of these scenarios, if the wheels fall off again and something pops up which makes it difficult or impossible to keep up the repayments, as they’re more likely to do as we get older, then you’re in trouble again.

If you don’t want to go bankrupt, then with these other two options, there’s then a bit of a routine and procedure that the law sets out to happen, to try and get your repayments frozen again for a while, or reduced. More cost for you, and they don’t go away.

I think that a better answer is for you, after you go bankrupt, is to voluntarily just set aside what you can, and when you can, and then just chip away at the debt, if you want to (but by law you don’t have to), at your own pace, and in your own time. Look at as being a bit like the old saying “a dollar down and a dollar a week”.

Nobody can make you do this though, as bankruptcy cancels the sort of debt that I’m talking about.

In an overwhelmingly majority of cases, bankruptcy lasts for 3 years, and in that time, or at the end of it, by law, you don’t have to pay back this debt again, ever. Some shady debt collectors may tell you that you do (and there’s a few around like that), but that’s not right.

Another great relief for age pensioners is that their bankruptcy is not advertised in the media anywhere. It’s very private. If you bankrupt yourself then you don’t have to go to Court either.

Your bankruptcy is recorded with the commercial credit rating agencies for 7 years though, so you will find it hard, if not impossible, to get credit or a loan again from the normal banking sources in that time.

Bankruptcy will cancel your credit cards, but these days some banks offer Visa debit cards, which can only be used if you have money in your bank account to immediately cover the cost of what you buy when using one, but at least you have a Visa card again.

The government also records your bankruptcy status on a database called the National Insolvency Index, and its there for life, and some information is accessible to the public, for a fee. To pensioners, I can’t see that this would be an issue at all.

Most age pensioners are also very relieved to be told that even though they go bankrupt, they should be able to keep their car.

As a bankrupt you can keep a car where your (net) equity in it is no more than $6,300, and that’s its wholesale value, not its card yard price. Age pensioners who are renters rarely have a late model car, so again, this is mostly never an issue.

If you are paying your car off and there’s a Bill of Sale on it, the $6.300 net equity means it’s the bit that you own as distinct from the bit that the bank or the finance company owns.

To get a guide on this, simply compare what you still owe on the Bill of Sale with what you think that a car dealer would offer you, in cash, not as a trade in, for it if you tried to sell it to them today.

The difference that’s theoretically left after you paid the finance company out, would represent the bit that you own. If it’s $6,300 or less, you should be ok.

If you’re paying your car off like this though, you’ve got to be up to date with the repayments when you go bankrupt, and stay up to date if you want to keep the car.

Also, as a bankrupt, nobody is likely to come to the house to take your household furniture and belongings away. There may be a few exceptions here if the bankruptcy trustee was advised that the bankrupt had something really valuable, like a Mona Lisa hanging on the wall. (That’s a bit of an exaggeration of course).

The government says that it can sell or take off you, during the 3 years of your bankruptcy, things like lottery wins or prizes of value (buy tickets in somebody else’s name), assets left to you in a will in that time, your interest in the family home, land, money in your bank accounts (but not your pension income dealt with earlier), shares etc, antiques or other saleable property which are “of value” (the crucial words here are “of value”).

This is rarely is an issue with people of age pension age who are considering bankruptcy. You’re pretty much left alone.

If the age pensioner owns a house then that’s a bit of a worry, as generally the person’s equity in the house means that they could get a loan to pay off the debts being discussed in this article. I’d try not to go bankrupt if I owned a home.

If you’re in debt in Australia and are considering bankruptcy, then a concern might be the so called ‘Stigma of Bankruptcy’. These days it’s really hardly an issue.

Also, bankruptcy is not a last resort, to be avoided at all costs.

If a person’s got what to them is overwhelming debt, and they’ve tried to get on top of it, but can’t, then declaring themselves bankrupt is a very practicable and sensible step to take. Mostly, it enables a person to get out of debt and so give themselves the chance to start again, to get back on their feet, and so be able to get on with their lives.

The ‘Stigma of Bankruptcy’ is an old fashioned term. It probably was to be avoided at all costs back in days gone by, but its rarely an issue ttoday.

Back in the ‘Stigma of Bankruptcy’ days banks in Australia were strict and conservative with their lending practices. You at least had to have a face to face interview with a Loans Officer.

In those days people who went bankrupt were mostly in business. It was pretty obvious when a business suddenly closed down that something had happened. Everybody knew, people talked, the shame of the ‘Stigma of Bankruptcy’ hung low in the air.

These days the banks have changed things. Loans are made over the internet and telephone. Pre approved offers of loans come in the post. The lenders have simply changed the rules and the risks.

Ordinary people now go bankrupt. In the year ended 30th June 2007 there were 25,242 bankruptcies in Australia, and of that number only 4,821 of them were business related bankruptcies. The rest were ordinary people.

Over the last 5 years to 30th June 2007 111,176 people have gone bankrupt ( www.itsa.gov.au and there click About us, then click Statistics)

Some of these 111,176 people may live in your street. They may sit next to on the bus or tram or train going to work, they may be some of the people that you know at work, and through work. If you knew, you’d be surprised to find who has gone bankrupt.

Chances are that you’d know more than one of them. Did you first suspect that they may have gone bankrupt because you noticed the ‘Stigma of Bankruptcy’?

Also, of these 111,176 who were declared bankrupt in those 5 years, did you read about any of them in the newspapers? Every day now just check the Public Notices section and you’ll see what I mean. Bankruptcy is very private, the newspapers will not be the source of a person’s ‘Stigma of Bankruptcy’ fears.

You wont have seen it on television either, unless it was somebody high profile, and newsworthy.

The people who will know that you’ve gone bankrupt are the people that you owe the money too. Your bankruptcy trustee will tell them, you don’t have to.

Your local bank may not be told. The return address for credit card statements are a GPO box somewhere?

If a person goes bankrupt I think that the real ‘Stigma of Bankruptcy’ is with the people owed the money. It now seems that it’s the banks etc who don’t want to be caught with the stigma of having to report to their shareholders and so to the public at large, including their competitors and peers, that the management has lost some of it’s shareholders’ money by lending it to people who couldn’t pay it back.

If a person goes bankrupt, then unless they’ve got something of value that their bankruptcy trustee would be allowed to sell (and there are some restrictions on a trustee here as there are a lot of things that he can’t touch) then the creditors mostly won’t get paid much, if anything.

If a person goes bankrupt, then for the next 3 years they can earn a minimum weekly net take home pay of $758.80 (current at 1st January 2008) that’s after tax and child support, and if applicable, business expenses, before the trustee can claim any of this income.

The $758.80 base figure increases is adjusted twice a year and is more if the bankrupt has dependants. If the bankrupt earns more than the base amounts, (known as the Threshhold) , then they can keep half of whatever amount goes over the Threshhold amount, as well as the minimum $758.80 or whatever it is that applies to them.

A bankrupt’s weekly allowable income is not likely to cause any stress or stigma during the (usual) 3 years of bankruptcy.

The ‘Stigma of Bankruptcy’ will be felt by a bankrupt’s creditors, the banks and others.

As a person falls behind in paying their loans and credit cards and other debts, after a few months they start to look a bit shaky from a debt collection point of view.

A widespread practice now is that some cases the creditors on-sell these possible bad debts to companies willing to buy them, at a big big discount on what is owed. Its then up to the buyer to collect payment, and as far as I am aware, when they do they keep it all.

In this way it seems that the banks etc don’t have to report the sale of these debts at a loss as bad debts. Saves face, saves a bit of Stigma.

It’s the buyers of these debts, who are now second hand debt salesmen, who have to cope with a loss if they don’t get paid because the debtor goes bankrupt.

So that they don’t lose of their money, and carry the stigma associated with knowing that their gamble has lost, the debt collection tactics of these second hand debt salesmen can be very aggressive.

They wrongly claim that bankruptcy is the last resort, and they seem to rabbit on and on a bit about at the ‘Stigma of Bankruptcy’. But it’s hardly an issue.

A person is generally bankrupt for 3 years, and their credit rating is damaged for 7 years. Overwhelmingly, for most people, going bankrupt does not affect their employment in any way.

Overwhelmingly, being bankrupt does not mean that you cannot travel overseas in the 3 year period of your bankruptcy. You simply have to seek the written permission of your bankruptcy trustee. Again, in modern times, very little stigma is suffered by the bankrupt.

If you’ve tried and tried but for some reason you just can’t pay your debts, then through bankruptcy, the government has given everybody the chance to get out of debt, to start again, to get back on their feet, and so be able to get on with their lives.

The ‘Stigma of Bankruptcy’ is hardly an issue.

Do you ever feel like the walls are closing in together ready to crush you? Are you in debt and over your head with interest rates ever increasing to the point you must either get a much better paying job or hire an attorney so you can go bankrupt? Or maybe the cost of going back and forth to your good paying job has forced you to put your house on the market except no one seems to be interested and all the equity you have gained is dissolving right before your eyes, money that could have been used for a new house in a better location.
Do you feel trapped by your home, job and the money it takes for you to live? Still it doesn’t keep you from pulling out yet another credit card because somewhere in your subconscious a voice is reaffirming that you have the right to Live A Good Life No matter what it cost. You make a great salary and shouldn’t you be able to buy what you want and do what you desire? Yet the cost of your ability to live a good life is greater than you think when you are unexpectedly hit with an unforeseen whammy from Mother Nature. A flood, tornado, hail storm or the worse possible unforeseen problem: a sudden loss of employment.
This is called the game of life. Twist and turns that make you play whether you want to or not, because we live in an uncertain world filled to the brim with unexpected happenings. Our accumulation of things for our family such as our home, cars, and even on how we balance our bank account are intricate playing pieces that either have the ability to change us and teach us from how we react to them or they can force the players to throw everything away and start their game of life all over again.
When you live in a world that isn’t perfect you must be ready for the unexpected. You must plan for the future or just when you think you have it all together everything falls apart unless you understand the purpose of this great world and what you are expected to know in order to survive what is going to happen next.
James 1: 12, “Happy is the person who remains faithful under trials, because when he succeeds in passing such a test, he will receive as his reward the life which God has promised to those who love him.”
Everything we experience in this world has a unique purpose geared to teach us secret spiritual truths that are not plain for us to understand until the proper time. Truths that are hidden until we come to a sudden awakening that shows us that we are not in control of our lives! Revelations that bring us to our knees so we will begin to understand that the only way to play the game of life and win is with the help of a Supernatural all knowing God. A God that is always in control of everything for the good of those who follow Him.
Romans 8: 28-30, “We know that in all things God works for good with those who love him, those whom he has called according to his purpose. Those whom God had already set apart to become like his Son, so that the Son would be the first among many brothers. And so those whom God set apart, he called; and those he called, he put right with himself, and he shared his glory with them.”
It is very important that all people of the world come to the same conclusion that we must follow God in order to overcome the tragedies of the world. We cannot play the game of life alone for we would be utter failures against all of the future events that we can not foresee before they capture our lives and bring us to our knees.
We need to be careful on how we view this world. We are not meant to just sail through life without any concerns or problems. We are here to learn and if we are caught without faith in God, we are liable to lose everything and gain nothing from the experience.
James 1: 9-11, “The Christian who is poor must be glad when God lifts him up, and the rich person must be glad when God brings him down. For the rich will pass away like the flower of a wild plant. The sun rises with its blazing heat and burns the plant; its flower falls off, and its beauty is destroyed in the same way the rich man will be destroyed while he goes about his business.”
To comprehend this passage of scriptures is to understand that the financial part of life is an intricate teacher of hard truths. It takes a person losing everything for them to come to the revelation that this world is not about personal wealth. It is not about the home you own or the car you drive or your position in your place of business. This is the reason why so many people are tested with financial failures. Our inability to control the world’s marketing system puts every person’s finances in constant jeopardy. We are the flower that is burned by the blazing heat of the world’s financial markets. When we put our faith in the things of the world it will teach us just how unstable our hopes and dreams can become.
Everything about our world teaches us the repercussions of the decisions made by those who control the world markets. The United States is experiencing a recession all because of how corporate businesses who desired to make more profits moved their businesses to China. China now is experiencing the greatest economic growth ever because they have the jobs. We all know that where there are jobs, money is spent. Money for cars, homes, and better lifestyles that prosperity can afford to give.
This is why we live in a very uncertain world and why putting our faith in money and greed can only lead us down paths that will destroy the lives we build from it. Greed will always lead big businesses to make a mess out of the little persons lives. Because the motivation is for the money they make and not for the people who work for them.
God is into developing the characters of people. He takes what the world does to people and teaches them how to defend themselves in the future. This is the reason it is so important to stay focused on God’s will for your life. This is why you must understand that you are in this world to learn life lessons that will teach you by what you learn in the world and not to follow greed.
The purpose of our world is not on how successful you are, but on how much you care about other people. If we were to follow those who are wealthy, we would quickly see how their motivation is not geared to how much they can make for those who work for them. They work for what they gain from their profits.
Look at the oil companies in the United States they are reaping the benefits of the skyrocketing foreign oil prices. The cost of getting the oil here has not changed for them, yet they are making tremendous profits because of their greed. The rich oil executives don’t care that they are throwing the entire United States into a recession. They don’t care about the poor and how they have to choose between buying food or the gas they need in order to go to work. All they care about is what the money can do for them.
James 1:27, “What God the Father considers to be pure and genuine religion is this; to take care of orphans and widows in their suffering and to keep oneself from being corrupted by the world.”
God loves people! He cares about everyone’s needs and He wants to teach us how to be good stewards of the money we earn in this world. We can’t live like the world. We can not live our lives only thinking of our needs. When we are focused on ourselves then we become targets of those who are in this world for greed. We must separate ourselves from the world in order to win the game of life.
We are here to have a good life in proportion to what we learn from the tests and trials we go through. Tests that build our character and teach us how to live the right kind of life. Trials that are designed to build our faith in God and not in the world. Experiences that are geared to prepare us for the perfect world to come that will allow us to reign side by side with Jesus Christ.
We can only gain from this world when we stop thinking of what we want and start changing into people who care about others. When we are wrapped up in the world we are vulnerable to the corrupting forces of the world like the fluctuating market to the corporate greed of big businesses that only thinks about profits. When God is first in your life you’re thinking about making the world better for the children you love. You’re listening to those who tell you not to over buy when purchasing a house. You’re learning when you buy a car that is too expensive and you’re learning why you shouldn’t overload your finances with credit card debt.
Our lives will be molded by what we learn and not from what we own. Our possessions cannot be taken into the next world, but everything we have done for others will be written down in the book of life. In return we will be paid back for everything we gave up to follow God’s path. A reward in the brand new world that is geared to bless us with so much abundance that we will not remember any of our suffering.

It seems like there is a lack of confidence in many things that people have previously trusted in. Financial institutions that have been around for over a hundred years are gone. Companies have gone bankrupt. The phrase, “job security” seems to be a misnomer.
Shady practices of lending institutions have been exposed. The approval and confidence of government leaders in both parties is at an all time low. In fact, government officials currently have the lowest approval ratings ever- single digits! Some Americans even think they should all be fired!
There is an enormous lack of confidence these days. There are serious concerns about the future. Many are worried and afraid. Some are confused and wonder how all this could have happened. Still others look for and fully expect their government to help and bail everybody out.
Having been disappointed, and even in some cases, feeling abandoned, people are looking for something that they can put their trust and confidence in. And when you think about it, all of the issues we are facing today seem to be related to money in one way or another.
Now let’s remember that money in and of itself is not evil. People misquote the Bible all the time and say that money is evil. The Bible says that the “love of money is the root of all evil.” We are certainly seeing the consequences of that today!
I wrote an article recently, called, “Whom Can You Trust Now?” I mentioned the origins of putting, “In God We Trust” on our money. Thinking about that could be a very good starting point!
Whenever you see money, or use money, or even think of money related issues, why not stop and take a moment and just remind yourself what is on all of our currency? This is a good starting point because it can help to begin to build confidence and trust in God.
It really is critical to build and develop confidence and trust in God. Having confidence and trust in God allows you to receive all that He has promised you regardless of any and all circumstances or conditions. There are no facts, no situations, no numbers, and no conditions that ever negate the promises of God!
I received an email the other day from an airline company promoting a really low fare. But, the low fare expires in one week. Perhaps you’ve heard commercials with the tag line, “Sale ends tomorrow!” Or, another popular line is, “Void where prohibited!”
When reading the promises in the Bible, you won’t read any legal disclaimer, or expiration dates, or that, “certain rules and conditions may apply.” The promises you read in the Scriptures are all true for you to claim right now!
People today are really unsure of where and whom to put their trust in. They are scared of being let down again. It seems that there is a great lack of trust in a great many people.
But, you can choose to trust in the One who is the most trustworthy. You can absolutely rely on God’s reliability. You can be certain that His promises are true and that He will bring them to pass for you when you simply believe them no matter what the circumstances or situation.
That’s why it is so important to choose to build and develop a confidence and trust in Him! You will not be disappointed. You will not have to live with worry, doubt and fear! And, then you will be able to genuinely help someone else to build and develop confidence and trust in God too!