How Bankruptcy Was Considered in the Past

How Bankruptcy Was Considered in the Past "Historically, when people heard the word bankruptcy, they envisioned becoming destitute. Not too long ago, bankruptcy carried with it a stigma. Filing for bankruptcy can still be emotionally taxing, but it no longer carries the same stigma as in the past. Not so long ago, bankruptcy carried this stigma of disgrace. Bankruptcy has become commonplace in the modern era due to the high unemployment rate and the number of foreclosures caused by debt. In 2010, 1.5 million bankruptcy filings were reported. In October 2005, Congress amended the bankruptcy code in response to a trend that allowed debtors to recklessly rack up credit card debt by purchasing opulent goods and vacations and then filing Chapter 7 bankruptcy to walk away from it all. This ultimately costs billions of dollars in wasted funds, leaving creditors holding the bag. Since so much money has been lost, the honest consumer is left to pay the bill. In modern times, bankruptcy is no longer synonymous with the term failure.Prior to the bankruptcy code adjustments in the early 2000s, credit card companies were so lenient with debtor qualifications that anyone could obtain a high-limit credit card. On a television investigative reporting program, a man was shown obtaining a credit card for his dog in order to demonstrate how simple it was. It is not surprising that the United States is in its current financial predicament. With this available credit, the majority of Americans are tempted to live beyond their means. These individuals purchased costly automobiles on credit, wore designer clothing, and purchased large televisions. When the credit card balance became unmanageable, they would register for a new card and transfer the balance. As the debt increased and only the minimum payments were made, living paycheck to paycheck became a reality. One unexpected expense or even a loss of employment is sufficient to push one of these debtors over the brink and into bankruptcy. This irresponsible behavior will impoverish anyone who engages in it. In the past, people saved for a special vacation or to purchase luxury objects, rather than using credit cards.Today, with 10 years of free, unlimited credit, the current economic situation in the United States continues to deteriorate. Coupled with the 10% unemployment rate, this has led many individuals to seek debt relief. When Congress amended the law in 2005, Chapter 7 bankruptcy became more difficult to qualify for. However, despite the changes, many Americans still qualify to file for Chapter 7 bankruptcy. Numerous Americans continue to be unemployed or underemployed, thereby qualifying them for Chapter 7 bankruptcy under the new means test. If an individual is currently employed and earning a substantial income, Chapter 13 bankruptcy may be an option. A Chapter 13 bankruptcy allows the debtor to make up with reduced payments over a period of three to five years, erasing any remaining unsecured debt at the conclusion of the payment plan. It is anticipated that 2011 will be another record-breaking year for bankruptcies. Along with the large number of bankruptcy filings, there will be a large number of option arm mortgages coming due this year and next year that will result in foreclosures.
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