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.
· 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.