Bankruptcy

Bankruptcy is the legal status of an individual or business that cannot repay its debts.

Bankruptcy is a way for people, couples, and businesses, who cannot afford to pay their debts, to be excused from that debt. Bankruptcy has been in existence in many cultures throughout the world for thousands of years. In the United States, we typically consider bankruptcy immoral because it impacts your credit score. There is still a time and place when declaring bankruptcy may be in the best interest of an individual, couple, or business.

Generally speaking, there are two types of bankruptcy filings. In a filing for a liquidation bankruptcy, debtors must surrender their assets, which are sold, and the proceeds distributed to creditors. In return, all debts are permanently discharged. Debtors are allowed to keep their assets in a reorganization bankruptcy filing. But the debtors must agree to an installment plan to repay creditors a portion of the amount they owe.

Filing for personal bankruptcy requires debtors to submit their petitions and fees to the bankruptcy court. The price is close to $300 for most personal bankruptcies. The petition will contain sworn statements by the debtors concerning the amount of money they owe, their income and expenses, and a complete list of all their assets. After filing, a court hearing is held to review the information in the petition.

When debtors declare a chapter 7 bankruptcy, they must turn over all the property that isn't exempt (see above) to a bankruptcy trustee. The trustee then both liquidates the property and distributes the proceeds among all the debtor's creditors, or the debtor may be able to keep the property and either redeem it by giving the creditor the market value of the property (redemption) or reaffirming the debt and continue making payments (reorganization).

The Chapter 7 trustee will take the debtor's non-exempt property (if there is any) and sell it. Any money left after paying all the debtor's creditors will then be given to the debtor. This may result in creditors receiving a small fraction of their claims. The balance of the debtor's loans and obligations are forgiven and can never be collected. Creditors who attempt to collect debts that have been discharged face severe penalties under federal law.

Let Your Property

SSL is a good option for anyone who cannot afford to pay his bills. A Chapter 13 bankruptcy, however, will reorganize your debt into a payment plan so that you can pay it off over a few years.

Chapter 13 bankruptcies allow you to keep many assets that would be liquidated under Chapter 7. For example, you can stay in secured debt, such as your car. The biggest downside of a Chapter 13 bankruptcy is that you must devise a repayment plan over three to five years.

Are you struggling to repay your debts but feel too ashamed to ask your friends and family for help? Don't despair. Bankruptcy is often viewed as a viable option for those seeking justice against those who hurt them or, in some cases, by those whose hands are tied until they speak out.

Businesses that have become insolvent but want to stay in business should try filing a Chapter 11 bankruptcy. Like a reorganization, Chapter 11 allows businesses to obtain protection from their creditors while putting together a repayment plan and significantly reducing liabilities. The reorganization plan can restructure business operations to help the failing business achieve profitability and remain operational.

When drafting the bankruptcy petition, the debtor must comply with many federal laws and regulations. Even an error at any process step can result in the court refusing to discharge the debtor's liabilities. When the bankruptcy ends this way, the consequences are disastrous. It's therefore wise to hire an experienced bankruptcy attorney at the outset.