Most Common Types of Bankruptcy

Growing up in a small rural community, I never really knew much about bankruptcy. It was a word that was whispered occasionally or said in a hushed tone as someone walked by, but not a common word. As I have grown older and as economic times have grown worse, it is becoming a very common word in our society. If you want to understand more about bankruptcy and bankruptcy law then continue reading and learn about the process and the best way to insure that you handle it properly.

Bankruptcy is when a person legally declares that they are unable to pay their creditors. Normally bankruptcy is a last resort for an individual after they have exhausted all means of paying their bills. With the current financial crisis that is occurring in the United States, there is a plethora of people declaring bankruptcy. It is very important to understand the different types of bankruptcy and the laws surrounding them if you find that you are in this situation.

There are a number of different “types” of bankruptcy. Perhaps you’ve heard terms tossed about such as Chapter 7 or Chapter 11 and wondered what they meant. For the most part, these are the two terms that you probably heard about. If an individual declares bankruptcy, they normally file Chapter 7 or Chapter 11. In a Chapter 7 type of bankruptcy claim, the individual normally gets to keep one vehicle, their main home, and personal assets such as clothing. Excess personal items, such as other vehicles are sold and the money earned is doled out between the creditors. Normally, most or all of the dept that the debtor owed is “forgiven”. This is a common type of bankruptcy declared in the United States. Another type of bankruptcy that is commonly declared is Chapter 11. Chapter 11 bankruptcy is normally declared by individuals who owe very large and substantial amounts of money. Because they owe such enormous amounts of money, their creditors will not “forgive” such large amounts, so they find they must declare Chapter 11. In Chapter 11 bankruptcy, the debtor also gets to keep most of their assets, but the court and creditors come up with a plan for the debtor to pay back the money that they owe over a number of years.

Whether you find that you are a person who needs to declare Chapter 7 bankruptcy, Chapter 11 bankruptcy, or another of the types of bankruptcy, the most important thing to do is know your rights as the debtor. The easiest way to make sure you are handling the process correctly is to find a lawyer who specializes in bankruptcy law. As with anything in life, it is better to find someone who knows the ins and outs of a topic. By choosing a lawyer who specializes in bankruptcy law, you will have someone on your side that knows the most current laws and can make sure that you are given the fairest treatment on your individual circumstances!

Disclaimer: This article provided by Jodat Law Group of Bradenton, FL

How to Deal With Bankruptcy Law

Bankruptcy is a very unfortunate situation and can happen even to seasoned businessman or to a new entrepreneur. To avoid falling into such a trap one should ensure to keep his or her financial health in a very good state. Filing bankruptcy is not an easy job and one has to go through a very complex process involving lot of complex court procedure. Also it affects badly your financial rating for securing loans, which you may need for business development or for your personal requirements at any future stage of your life.

Bankruptcy is a law provided for those who are unable to pay their debts and this law is utilized to provide them with a way of paying their creditors. Since there is no debtor’s prison any more, no one has to worry about going to prison because of not being able to pay. Instead, bankruptcy consolidates the debts and sets up a schedule by which the debts can be paid.

One of the main purposes of Bankruptcy Law is to give a person, who is hopelessly burdened with debt, a fresh start by wiping out his or her debts. Actually life is not always fair. Most people that file for bankruptcy do so out of necessity not because they simply want to avoid paying their debts. Of all the people that file for personal bankruptcies, nearly 40% of them file due to some financial crisis outside of their control. In many cases this financial crisis is some serious health issue.

The debtor has to file the bankruptcy report in the court to stop further payment of interest on the borrowings on account of his inability to repay with declaration that his income is not going to improve in the near future as well. This requires furnishing causes of bankruptcy viz. losses in business, family dispute, job loss, poor health or illness, heavy expanses on treatment, natural calamity resulting in damage to assets or business etc.

Economic and social changes have prompted the need for reform on the bankruptcy laws through the years. The past couple of decades have seen changes in the financial world as well as social upheaval. With credit flooding the nation the past several decades, consumer debt has sky rocketed and the rate of default on credit cards has caused many to seek bankruptcy protection. Medical problems, divorce and job losses have caused most of the Chapter 7 bankruptcies.

A record number of bankruptcies were filed in the 1980s and early 1990s. Job losses and business losses accounted for this record number of bankruptcies. Many small businesses closed during this period, but also large companies such as Texaco, Continental Airlines, Greyhound and Pan Am also filed for bankruptcy. This large number of bankruptcy filings put the bankruptcy courts in a bind to handle all of them; thus, they utilized the assistance of bankruptcy professionals to speed up the court procedure. These professionals were approved by the court to act as examiners and mediators.

Steve Buchanan writes article for and

What Happens at the Chapter 7 Court Date?

Shortly after your Chapter 7 bankruptcy case is filed, the Clerk of the U.S. Bankruptcy Court will send notice of your filing to all parties and creditors listed on your bankruptcy petition. The clerk will also assign a Chapter 7 bankruptcy trustee and set a date for your Section 341 meeting of creditors. There are several reasons for the Section 341 meeting of creditors. 1. The meeting is required in the bankruptcy code. You must be examined under oath with regard to the information contained in your schedules to be eligible to receive a discharge. 2. It gives creditors an opportunity to ask questions of you with regard to the information listed in your petition and schedules; 3. It allows the trustee to take sworn testimony from you with regard to the information contained in the petition and schedules. A trustee will ask you additional questions with regard to your assets, liabilities, income, expenses and statement of financial affairs.

How long will the meeting take?

The meeting can take five minutes or the meeting can take thirty minutes or longer. The meeting can also be continued over to another date if the trustee requires additional information for you to provide.

You should be prepared prior to the meeting with the types of questions that are going to be asked by the trustee. In some jurisdictions, the trustees are required to ask identical questions of each debtor. In other jurisdictions, the trustees are given greater latitude to ask questions of their choosing. In either case, the questions are typically straightforward. They are not designed to trick you into saying something that is not true. They are more or less fact-finding questions so the trustee can determine whether or not there are any assets that can be administered in your case. The overwhelming majority of Chapter 7 bankruptcy cases do not involve the administration of an asset. An exception to this occurs when you either understate the value of your property or you fail to disclose an item that has value beyond what the exemptions can protect.

Who appears at the meeting of creditors?

In most cases, the only three people who will be present at your meeting of creditors are you, your attorney and the Chapter 7 bankruptcy trustee. The most common creditors such as credit card issuers, medical providers and unsecured loan companies rarely if ever appear at the meeting of creditors. Every once and a while an uncommon creditor will appear such as a former friend or enemy that is owed money. Most of the time, these people do not realize that there is nothing to gain by attending. They read the notice that they received about your bankruptcy case and assume that they need to be present. In reality, they are usually wasting their time since in the majority of cases; there are no assets available for creditors.

In some cases, especially if the amount of debt is excessive, a representative from the U.S. Trustee’s office may sit in on the case and monitor the answers given by you. The U.S. Trustee’s office has a separate and distinct function, which I will detail later in this writing. For now, lets suffice to say that the U.S. Trustee’s office oversees the complete process of the bankruptcy case and the process of receiving a discharge in that bankruptcy case.

A secured creditor, such as an auto finance company, may appear through one of its representatives. That person may be tendering a reaffirmation agreement for you to sign. If that is the case, your attorney will check the agreement and ask you if it is something that you are interested in signing. In smaller jurisdictions, most agreements are mailed to your attorney prior to the meeting of creditors.

David M. Siegel is the author of Chapter 7 Success: The Complete Guide to Surviving Personal Bankruptcy. He is a member of the American Bankruptcy Institute and currently practices bankruptcy law in Chicago and its surrounding suburbs. Additional information is available at .