Bankruptsy is one of the most common misspellings of the word 'bankruptcy'. Regardless of how you spell it, bankruptcy can provide relief for individuals and businesses struggling with outstanding debts.
There are six bankruptsy chapters including: 7, 9, 11, 12, 13 and 15. Personal bankruptcy chapters include 7 and 13. Chapter 9 and 11 are usually limited to businesses including corporations, partnerships and sole proprietors. Chapter 12 is reserved for farmers and fishermen; while Chapter 15 is used when debtors possess dual citizenship in a foreign country.
Chapter 7 is oftentimes referred to as 'Bankruptsy Liquidation'. Debtors are required to sell or return non-exempt assets to repay creditors. Any remaining balances are discharged through the court and the debtor is no longer responsible for repayment.
While Chapter 7 is the preferred choice for most people, the new bankruptcy laws enacted in 2005 made it much more difficult to obtain. In most cases, debtors now have to file for Chapter 13 bankruptsy; also known as 'Reorganization Bankruptcy'.
Chapter 13 bankruptcy allows debtors to repay their debts over an extended period of time. Chapter 13 payments generally last three to five years; depending on the amount of debt owed. The biggest challenge most people encounter with this bankruptsy chapter is the financial constraints placed on them through the repayment plan.
When Chapter 13 payments are established, debtors must make payments to the bankruptcy Trustee, who then distributes funds to creditors. If individuals are unable to comply with the repayment plan, one of two things will occur.
First, the bankruptcy judge will review the case to determine if the debtor can file for protection under Chapter 7. If extenuating circumstances caused the debtor to fail out of bankruptcy, the judge can elect to discharge debts.
If it is determined the debtor failed out of bankruptcy due to reckless spending, the judge can elect to dismiss the case; eliminating all protection from the court. When this occurs, creditors can commence with collection actions, including foreclosure. The debtor is prohibited from filing for bankruptsy protection for eight years.
As you can see, there are many rules and regulations to filing for bankruptcy protection. It is highly recommended to retain the services of a bankruptcy attorney to ensure all documents are properly filled out and filed through the court system.
Prior to making the decision to file bankruptsy, financial experts advise considering bankruptcy alternatives such as debt consolidation or debt settlement. It is important to understand that bankruptcy remains on your credit report for ten years and can affect all aspects of obtaining credit in the future.
Published on February 03, 2009 at 03:42 AM