In these uncertain economic times, bankruptcy is becoming more and more common. The once viewed as a mark of shame and an end to one’s financial life, bankruptcy has started becoming a more acceptable way to go. It occurs when one can no longer pay their debts to any degree. Declaring bankruptcy voids all of your debts, but destroys your credit rating for an extended period of time. Restoring your credit rating is a slow process, even in the best of circumstances, and bankruptcy can make it almost impossible. It can be a hole that you will never escape. The problem is that bankruptcy eliminates your ability to take on new creditors, which in turn eliminates your ability to demonstrate that you are not a credit risk.

Bankruptcy loans are not new, but the recent surge in bankruptcies has given them a bigger spot on the financial map. Bankruptcy loans are loans that one can take after declaring bankruptcy. They are specifically engineered to be accessible to individuals of poor or no credit, and can give one the opportunity to make an investment with a creditor that borrowers would not previously have a chance to make, thus allowing them to demonstrate that they no longer pose a risk and can, in fact, be trusted. Bankruptcy loans can be difficult to find, but they do exist! Ask any acquaintances or business partners you have in the financial sector, locally, and you should be able to find at least one institution willing to negotiate for one. They function by requiring the borrower to wait at least two years after their declaration of bankruptcy.

After that, they must generally demonstrate their changed attitude on a small scale with a certain number of creditors. Some banks will require a single creditor, while others may require as many as five. Before you begin to think that this eliminates the value of bankruptcy loans, consider that no other loans will be made available to you at this time, as most loans almost always require good credit. After reliability has been demonstrated on the smaller scale, loans start becoming available for a certain amount of money.

This money can go to the down payment of a house or a car, or it can be used to start a business or some other action that will foster future income. And that is the whole idea of bankruptcy loans to begin with – to make it possible for individuals that have turned over new financial leaves to start new financial lives without the stigma of bad credit following them around.

Bankruptcy has many reputations, some people think that bankruptcy will take care of all their debts and life will be good. Some people file as often as they can, they have made it a way of life. Some people should file and don’t because of what other people will think.

Filing for Bankruptcy does not get rid of all debts. Some of those debts include but are not limited to: Alimony, Child Support, Back Taxes, Student Loans, and Fraudulent debts, and recent large purchases of more that $550 for luxury item purchased within 90 days of filing.

There are two different kinds of bankruptcy a consumer can file for Chapter 13 and Chapter 7. Chapter 7 is total liquidation it is the quickest. Federal bankruptcy laws provide a “means test” to determine eligibility. Also beginning October 17, 2005, you must obtain approved credit counseling before you can file bankruptcy. Another new federal bankruptcy requirement is that you must file any overdue tax returns within weeks of filing a Chapter 7 bankruptcy. Under Chapter 7 bankruptcy there are certain items that can be kept but have limits. There are State exemptions and Federal exemptions and rules that go with them. Another thing to consider is Chapter 7 will not fix is your credit score. If you are behind on your bills your credit may already be bad and bankruptcy cannot fix it. If someone has co-signed a loan with you and you file for bankruptcy, the co-signer may have to pay your debt.

Chapter 13 is a reorganization of debt. While many think that they will have to pay the entire amount of outstanding debt, under Chapter 13, individuals literally pay pennies on the dollar and work through a repayment plan that helps them achieve freedom from their debt in a period of between three and five years. There are many steps to filing Chapter 13. Many assets can be kept and protected under Chapter 13. Like Chapter 7 there are also qualifications that need to be met before filing Chapter 13.

There are alternatives to filing bankruptcy. Bankruptcy should be the last resort. There are many attorneys that specialize in this area. Each state has its own rules along with many federal rules and regulations. An attorney can help decide whether or not someone should or can file for bankruptcy, which kind of bankruptcy, and whether or not they are eligible.