Bankruptcy
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Bankruptcy |
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t is important to read and know the basic bankruptcy information and some of the most important provisions included in the federal and state-specific bankruptcy laws. Knowing basic bankruptcy information is important should you decide to file for bankruptcy. Knowing what to do and what to expect can be easier on your part, too. There are so many intricacies in bankruptcy laws enough to keep your head spinning, but learning the basic information will suffice for now. What are some of the bankruptcy questions you want answered? For one, you need to know what bankruptcy protection you can avail of. What are the processes involved in bankruptcy declaration and what could possibly be the ramifications of this action?
Individuals may choose several different types of bankruptcy based upon the
amount and nature of the debts, the exemptions available, and the types of
assets they own. The different bankruptcies are named after the
corresponding chapter in the code.
Chapter 7 is referred to as "straight" or "liquidation." In a liquidation, the debtor turns all of their assets over to a trustee. The trustee then liquidates (sells) all the assets and distributes the proceeds to the creditors. The person is then discharged of all debts, except those which cannot be discharged. Creditors must look solely to the assets held by the trustee for payment. Creditors can’t come back later and try to collect their claims from the discharged debtor. A debtor can receive a Chapter 7 discharge once every seven years. Chapter 13 debtors pay their debts through future income rather than liquidation of their current assets. This chapter usually allows the debtor to keep much of his or her property. Under Chapter 13, the debtor presents a plan for repayment, which is reviewed by the trustee, the creditors, and the Bankruptcy Court. Chapter 11 is a reorganization proceeding, usually involving corporate debtors. It’s also available to individuals who have engaged in commercial enterprises. This chapter is used when the owner desires to stay in business, restructure existing debts, retain assets, and attempt to reorganize under court supervision.
The most dramatic benefit to declaring bankruptcy is creditors must
immediately cease collection actions pending the outcome of the bankruptcy. This
applies once you, or the Court, have notified them that the filing has taken
place. Anther major benefit is that the bankruptcy allows you to start over
from scratch without burdensome debt, and with some assets to minimize the risk
of your being bankrupt again. Filing bankruptcy is drastic but can also be the
fresh start you need. |
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Bankruptcy
is a way to temporarily suspend (during the course of the proceeding), and later
prevent, all debt collection actions for debts you had at the time you filed
your bankruptcy petition. Once a person files for bankruptcy, the federal court
grants an "automatic stay." This prevents creditors from attempting to collect
on any outstanding debts. Creditors may petition the court for relief from the
automatic stay. Often, creditors whose loans are secured by property are
permitted to take possession of that property.