A Complete Guide To Bankruptcy

Bankruptcy is a legal status of an individual or company declared by the state or federal court. This should be the last effort for the people who are overloaded with debts and loans. Bankruptcy provides a temporary solution in erasing off all the debts and loans or a part of it and results in a long term of consequences. Filing bankruptcy is a bit expensive and a formal consultation should be taken from a legal debt management organization before filing.

What are the consequences of bankruptcy?
The foremost objective of bankruptcy is it removes all the debt, sometimes all the debts and many times a part of it. The rest of it is all negative consequences. Depending on the chapter a bankruptcy case is filed, the bankruptcy stays on the credit report of a person. Most cases are filed under chapter 7, the state of being bankrupt stays in the credit report for 10 years. When filed under Chapter 13, bankruptcy stays for 7 years. This may prevent an individual from acquiring new credits for that declared period of bankruptcy. The credit score and credit report remain unchanged if the payments are paid on a date after declared as bankrupt.

Where does the bankruptcy state fail to help?
There are certain debts that can be discharged by declaring bankruptcy. But there are certain debts where bankruptcy cannot help.

They are:
· Alimony after divorce,
· Payments for child support,
· Debts that come in line after or six months prior to bankruptcy,
· Fraudulent loans,
· Debts from personal injury while driving intoxicated,
· Student loans and taxes, etc.

These are the debts that cannot be discharged by declaring bankruptcy.

 

What is the alternative for declaring bankruptcy?
Filing bankruptcy is not the only solution for a person who has overloaded unpaid debts. The person should find is there any possibility of repaying the debts on his own. There are fair chances for the creditors to accept for a negotiation. By doing so, the affected person may achieve a conclusion in the form of a loan settlement or repayment plans. A portion of the property can be sold and the initial debt amount can be repaid. The person who is inefficient in handling debts can consult a debt management company for proper management of the credits and debts. Filing bankruptcy should be the last choice left.

What is the role of the trustee?
A trustee will be appointed by the court to represent the creditors. The responsibility of the trustee is to verify the facts and details provided by the person filing the case and check for any misleading information and monitor the process in bankruptcy.

What happens on and after filing the case?
With the support of a bankruptcy attorney the case should be filed. The case should fit under Chapter 7, which evaluates the income of a person as a factor to take up the case and Chapter 13 is the option for people who are reluctant in owning their property and do not qualify for filing under Chapter 7. Upon categorizing the section, the bankruptcy forms should be filled, filed, a bankrupt trustee should be received, credit counseling should be attended, and meeting with the creditors should be attended.

There will be two hearings prior to filing the case; the first hearing will include the meeting of the creditors where possible negotiation will be done regarding the repayment plans. Upon coming to an agreement in the meeting, a hearing confirming the plan for repayment of debts will be declared by the judge.

Understanding The Meaning Of Bankruptcy

The word Bankruptcy is a nightmare for every individual especially those businesses which have a significant goodwill. Bankruptcy is a legal term or statuses that have given to the people who are unable to pay their debts. It is a term given by the court after getting an application from the individual. Bankruptcy can refer as the final way for those who have loads of debts and bills to pay. The state of bankruptcy is the operational way to clear out the debt obligation.

Even though it is a legal way, it indeed has some consequences. Bankruptcy can affect your credit ratings and any plan to use the money. It can stop getting wages, and you might have to face the legal actions of the creditors as well. Filing for bankruptcy is a costly and complicated procedure. You will have to check everything before filing for bankruptcy.

The consequences of bankruptcy are big. Once you declare yourself as a bankrupt, your credit ratings will go down. The drop in credit rating depends on which chapter your bankruptcy comes under. For example, if your case comes under chapter 7 of the bankruptcy act, then your credit report will have a bankruptcy in it for seven years, and if you case fall under Chapter 13, the bankruptcy will remain for ten long years.

During this time you will not get any loans or credits from anyone. You will not be able even to apply for any jobs as the case can create issues for you. Being bankrupt means your credit report has got damages. So if you pay your bills correctly even after declaring bankruptcy, it will not create more damages to the report.

 

If you consider bankruptcy as a way to escape from the bills and loans, there are some other things where the bankruptcy cannot help you such as child support, fraudulent loans, etc. If you have taken the loan as a group of people, the other people will be still responsible for the loan, even though you are bankrupt.

There are different types of bankruptcy. The most common types are chapter seven and chapter thirteen. Non- business bankruptcy cases fall under chapter seven. In this, you can keep your critical assets however the exemption can vary. You can receive your pensions even if you are bankrupt under Chapter 7. Chapter 13 is only possible for those whose debts should not exceed a certain limit. A 3-5 year plan is available wherein you can pay back your creditors. If you do so, the remaining cases will be taken off from the bankruptcy case.

A lot of people consider bankruptcy after they pursue debt settlement. This settlement means combining all your debts together so that you can make timely and regular payments to clear the debt. This attempt can help you get back on track. The real aim of this settlement is to speak with your creditors and get a lower payment as your repayment amount. If the creditors agree to this settlement, you can slowly repay all your debts.