Bankruptcy is a legal proceeding
Bankruptcy is a legal proceeding that allows individuals, businesses and couples who are not capable of meeting their financial obligations to be excused from paying some of their debts. Bankruptcy has been part of the laws since the ancient times. In the United States, bankruptcy is governed by the federal law, in which states are not allowed to legislate in this area.
If an individual feels overwhelmed by debts or financial obligations, they are free to file for bankruptcy declaration through the bankruptcy court. To be successful in getting a favorable bankruptcy ruling, it is important to have a good bankruptcy lawyer. In general ,there are two types of bankruptcy; In a liquidation bankruptcy, it is necessary for the debtor to surrender their property which is then sold and the money used to pay his/her creditors. In a reorganization bankruptcy, the debtors are allowed to retain their properties but must agree to repay some of the amount owed to the creditors in installments.
To file for bankruptcy one must submit a petition with a fee of $300 to the bankruptcy court. The petition submitted must contain sworn statements by the debtor giving detailed information on the amount they owe, their personal income and expenses and a full list of their assets. After the petition is filed, the court holds a hearing to review the information. Most individuals use their Local Bankruptcy Attorney MyBKHelp to go through the process.
The two main types of bankruptcy are governed by two constitutional chapters. The chapter 7 bankruptcies are the most common. Also known as the liquidation bankruptcy, the debtors are force to surrender all their "non-exempt" properties to the bankruptcy trustee. The exempt properties are those properties that the debtor is allowed to retain. They include clothes, work tools and in some cases car and family homes.
In Chapter 7 bankruptcy, the trustee takes the debtors "non-exempt" properties and sells them then pay the money to the debtors creditors. In this situation, some of the creditors will receive a portion that is far much less their claim but they are not allowed to claim for the remaining amount. The debtor is therefore free of all debts and any creditor who tries to claim any amount will face dire consequences from the law.
The Chapter 7 bankruptcy is popular since it completely wipes out the debt. However, the chapter 13 bankruptcy has a lot of benefits too. Also known as reorganizational bankruptcy, chapter 13 allows the debtor to repay his creditors in monthly installments for a period of about 3 to 5 years. Some of the benefits one gets from Chapter 13 bankruptcy entail factors such as restructuring of secured loans by reducing the principle to the current market value of the collateral and extending the payment period for up to 60 months. Other factors like student loans and mortgages can be reorganized too and the creditors are not given any choice on the matter.
The Chapter 7 bankruptcy is not available to all. If you had been awarded a chapter 7 bankruptcy in the past 8 years you can not re-apply. For chapter 13, the waiting period before reapplying is six years. If you have enough income to repay your creditors, you are also barred from filling for reorganizational bankruptcy.