Bankruptcy Can Be Voluntary or Involuntary

When facing bankruptcy, most people would prefer doing it on their own. Involuntary bankruptcies are no fun.

It is not too surprising that bankruptcies tend to reflect the state of the economy. When the economy is in good shape, there are not many bankruptcies. When it is bad, bankruptcy figures start to soar. In 2009, close to 1.4 million bankruptcies were filed across the nation.

There are two kinds of bankruptcies, involuntary and voluntary. While it is true that involuntary bankruptcies are the exception rather than the rule, they do happen fairly often. An involuntary bankruptcy happens when a creditor legally and literally forces a debtor into bankruptcy. This can happen to anyone, at any time, at any age and in any social strata, including famous people. Bankruptcy is not fussy about who it hits.

Most bankruptcies are done voluntarily, and while still a blow to those who have to declare it, there is some saving of face in the fact that they did it on their own. Is there any good news in the bankruptcy statistics? According to some pundits, it is beginning to look like the economy has hit the absolute bottom and is now aiming to come back up for air. Evidently, the possibility of a turnaround is being fueled by court records, of all things. The records are suggesting that bankruptcy rates dropped by 8.9 percent in June 2010.

While that is indeed good news, there are still those struggling to keep their heads above water and decide which Chapter they want to file under. The long-term forecast though could mean that those just beginning to head down the road to bankruptcy may have a reprieve. When the economy is balanced, typically you have the opportunity to recover from your losses. It may take you a while to do that, but the chance would be there.

Still and all, if you do not have a chance to ride the wave of a more balanced economy, you would have a new opportunity to start all over again financially if you do declare bankruptcy. That is what bankruptcy laws are all about in the first place; offering protection to the honest individual to allow them to work their way out of a bad financial situation they had no control over. This is not to say that creditors don’t have protection, because they do, as does the debtor. In other words, it is about financial balance and equity.

Kevin Ahrenholz is an Iowa bankruptcy lawyer and Iowa bankruptcy attorney. To contact him, visit https://www.iowachapter7.com or call 1.877.888.1766.