The personal savings rate fell to a minus 1.5 percent in August 1999, despite the fact that personal incomes rose. Another reason, it's argued, is that households feel less stigmatized by bankruptcy than they once were, and are more inclined to rely on it to banish debt instead of working hard to gradually pay off creditors. That reliance on bankruptcy may change if Congress passes a proposed law to make it more difficult to declare bankruptcy. And, of course, even financially stable families can fall into serious debt problems through a sudden loss of job or an unexpected financial catastrophe such as large medical or legal bills. Financial experts warn consumers, however, that while declaring bankruptcy may be appropriate and necessary for some, it is not the easy answer they may perceive it to be.
Personal bankruptcy comes in two forms.
This works best if you have regular income and substantial assets. Chapter 13 stays on your credit record for seven years. Chapter 7 is the more drastic form. It basically allows you to start over by erasing your debts with the exception of back taxes, child support, alimony and most student loans. However, the court sells off all your assets except for certain exempt assets.