Get Out Of Debt

Finding yourself in a difficult financial situation can be scary. Facing the possibility of dealing with bankruptcy can be even scarier, especially since most individuals or businesses don’t spend time making themselves aware of the legalities that go along with the process. Since many debtors are ashamed of the situation, they often fear asking too many questions regarding the process. As bankruptcy is one of the most important financial decisions a business or individual will ever make, it is essential to have correct bankruptcy information before getting starting with the process.

The federal court systems in the United States deal with all bankruptcy information and set the laws regarding the process. This does not mean that an individual has to go to Washington D.C. to file though, as each state will deal with individuals and businesses during proceedings. This may mean going all the way to the state capitol though. The federal laws on bankruptcy information state that these laws are in place simply to give an honest, but fallible debtor a fresh start.

One of the most important pieces of bankruptcy information to know is that the courts don’t come to the individual or business to file, the individual or business goes to the courts. Simply by filing a petition called a Statement of Intentions, the debtor lets the court system know that they are applying for bankruptcy.

Just because a debtor files the Statement of Intentions does not always mean they will go all the way through the legal system. The courts will need to gather important bankruptcy information through forms that will need to be filled out by the debtor. These forms allow the courts to review a debtor’s credit history, list current creditors and the amounts of the debts, as well as current and past work history. From this the federal court system will make a determination as to whether or not a debtor can proceed with the court case.

Keep in mind that the debtor does not have to hire an attorney to represent them through the proceedings, although attorneys can be a great source of knowledge regarding bankruptcy information. Many debtors are scared to hire an attorney because of additional charges that they cannot afford, but most attorneys are reasonably priced due to the circumstances. Often times attorneys will not charge a fee for an initial consultation when the debtor is simply trying to acquire bankruptcy information.

Unfortunately, most of the general public does not have a thorough understanding of bankruptcy information. This causes misconceptions regarding bankruptcy. One of the major misconceptions of bankruptcy is that all possessions are taken and repossessed by the courts. Since there are many different chapters of bankruptcy, there are also many different takes on repaying debts, and only Chapter 7 requires a complete liquidation of assets. Even with Chapter 7, debtors are allowed exempts, or items that are necessary for living.

One more important piece of bankruptcy information to keep in mind is that there is a new bankruptcy law in place called Bankruptcy Abuse Prevention and Consumer Protection Act. This law was implemented in 2005 to stop fraudulent bankruptcy claims and may make it more difficult to convince the courts of a claim.

Although filing for Chapter 13 and Chapter 11, or reorganization plans, have not changed that much, filing for Chapter 7 has becoming increasingly difficult. Previously, debtors were not required to take courses on debt, but with the new law in place, Chapter 7 debtors are required to take Credit Counseling and Financial management courses before the process can be completed.

With the proper information in regards to the new bankruptcy laws you can avoid the hassles many people have to deal with because they did not take the time to do some research. Only you can decide what is best for your debt burden with the current bankruptcy law.

Types of Bankruptcy

You may have heard of someone filing for Chapter 11 or Chapter 7. What do they mean by this?

These are actually the types of bankruptcy, so-named after the title of the Chapter of the Federal Bankruptcy Act in which they appear. There are three common types of bankruptcy available. Here is a quick rundown of each one:

Chapter 7

This is also known as liquidation. In a Chapter 7 bankruptcy case, all the assets and nonexempt properties, if any exists, of the debtor must be turned over to a trustee for the purpose of converting them into cash to pay the debtor’s creditors.

In return, the debtor receives a Chapter 7 discharge in the form of a court order, releasing the debtor from all of his or her dischargeable debts. This order also has the effect of preventing creditors from attempting to collect these dischargeable debts from the debtor.

Note that there are some debts which cannot be discharged with a Chapter 7 bankruptcy.

Chapter 11

This type of bankruptcy is typically used for business bankruptcies and restructuring. As such, this is not an option for individual consumers. Besides being far more complex, it is also more expensive to pursue.

A Chapter 11 bankruptcy gives businesses the opportunity to reorganize themselves, restructure debt, and get out from under certain burdensome leases and contracts. “Business” here may include a corporation, sole proprietorship, or partnership.

When a corporation files for a Chapter 11 bankruptcy, the stockholders’ personal assets are not at risk. Since a corporation exists separate and apart from its owners, the stockholders, the only asset the latter stands to lose are the value of their investment in the company’s stock.

Chapter 13

This is sometimes referred to as a “mini Chapter 11″ because it allows small proprietary business owners and certain qualified individuals to file for it in order to repay their creditors but still retain your property.

So how is this different from a Chapter 7 bankruptcy, which likewise allows you to retain certain exempt properties and assets? Chapter 13 is different in that it enables a debtor to retain the assets that would otherwise be liquidated by a Chapter 7 trustee.

In most cases, you can keep your home and your car under either Chapter 7 or Chapter 13. However, there are certain instances under Chapter where you would not be able to keep your rental properties, antique gun collections, etc. Whereas, if you file for a Chapter 13 bankruptcy, you may be able to keep these “luxurious items” and submit yourself to a Plan where you can make repayments.

The goal of a Chapter 7 bankruptcy is to discharge your existing debts so you can get a “fresh start” on your finances. A Chapter 13, on the other hand, obliges you to repay most or all of your debts before your slate is wiped clean. It is because of this – you repay your debts – that you gain a certain advantage over a Chapter 7.

Make no mistake that bankruptcy is a complex process. There are many intricate details involved in this legal process that should be taken into consideration before making any decisions involving bankruptcy. The information above is only basic. There are still many important questions that may arise and only your bankruptcy lawyer who knows more about your particular situation can authoritatively answer your questions.