Bankruptcy is a process whereby the court administers the assets of a debtor in order to satisfy the creditors. A debtor may choose bankruptcy as a way to resolve a hopeless financial situation or to hold off the debt collectors long enough to allow for the institution of financial reorganization. Either individuals or businesses may file for bankruptcy and in some cases a creditor may force a debtor into bankruptcy proceedings. The bankruptcy falls under US control and has two goals: fair treatment for creditors and to allow businesses and consumers to obtain a fresh start.
Whether you should file for bankruptcy depends on several different things and should be weighed carefully. However under certain conditions it is probably in our best interest to file bankruptcy. Some of the reasons that might render bankruptcy the best choice include the following:
• You are only able to make minimum payments on your bills
• You are unable to create a budget that will get you get you out of debt in five years
• Your mortgage or loans are facing foreclosure
• You have experienced a severe financial setback
There are a couple of alternatives to bankruptcy such as attempting to negotiate with creditors to reduce monthly payments or working with a non-profit credit counseling agency. Because there are some consequences one must face when filing for bankruptcy, if there are alternatives available, you should use them whenever possible. Bankruptcy will stay on your credit report for ten years, so even though you cannot be fired from your job for filing bankruptcy, you may find it very difficult to be approved for credit because you are considered by creditors to be a higher risk.
Bankruptcy laws differ from state to state, but each state has a list of exemptions that protect certain assets such as your house, car (if it falls below a certain value), retirement funds, household goods and clothing. The majority of people who file bankruptcy are able to keep all of their possessions. You can even keep your mortgage or car as long as you continue making the payments. Some debts are excluded from bankruptcy including the following:
• Child support
• Recent back taxes
• Student loans
• Large purchases that have been made recently
• Fines or penalties imposed by government agencies
• Fraudulent debts
There are several bankruptcy chapters that may be filed. The most common ones are the Chapter 7 where businesses and individuals give up some non-exempt assets and are discharged from most debts; Chapter 9 is the same as a Chapter 11 but is specifically for municipalities; Chapter 11 allows businesses to reorganize their debts and in order to remain operational; Chapter 12 provides debt relief for farmers and fishermen who have a regular income; and Chapter 13 allows an individual with a regular income to repay debts under a court appointed payment plan.
An automatic stay is granted as soon as someone files for bankruptcy and stops any further collection action by creditors. When the procedure is finalized, any debts that are discharged do not have to be repaid. With a Chapter 7 this happens almost immediately but with a Chapter 11 and Chapter 13 any remaining debts are discharged at the end of the repayment period.
This article was provided by http://www.jodatlawgroup.com/bankruptcy-attorneys.nxg
Disclaimer: This article provided by Jodat Law Group of Bradenton, FL
Filed under: Bankruptcy Law |