Bankruptsy

Basic Information About Bankruptcy

If you are facing mounting financial troubles, you may be considering bankruptcy. There is a lot of confusion about bankruptcy and the different types of bankruptcy – and what happens during and after bankruptcy proceedings. Knowing exactly what you are getting into when considering bankruptcy is important to determine if it is truly the best or only option available.

What is Bankruptcy For?

According to the Federal Bankruptcy Laws, the goal of bankruptcy is to help a debtor who has gotten himself into insurmountable financial trouble a way to begin again and forgive certain debts (keep in mind some debts will not be removed via the bankruptcy process.)

How Does Someone Begin Bankruptcy Proceedings?

You may have heard the term “filing for bankruptcy.” This is because bankruptcy proceedings begin only once the debtor in question files a petition with the courts. This petition will include financial information – so be certain if you are thinking about filing for bankruptcy you have an accurate account of all your current assets, liabilities, and the names of and amounts owed to your creditors, such as credit card companies, or various other loans you may have taken out for different expenses. Of course, before filing this petition, it is wise to see if other options, such as debt or credit counseling may be successful in repairing your credit and financial situation, as a bankruptcy remains as a negative mark on one’s credit report for 10 years.

Types of Bankruptcy

The most common types of bankruptcy are Chapter 7 and Chapter 13.

What is a Chapter 7 Bankruptcy?

According to the United States Bankruptcy Code, “To qualify for relief under chapter 7 of the Bankruptcy Code, the debtor may be an individual, a partnership, or a corporation or other business entity.” Discharges of debt are only available to individual debtors, not to entities like a partnership or corporation as a whole. A Chapter 7 bankruptcy costs $200 to file. With a chapter 7 bankruptcy, you are generally allowed to keep any property which you are not behind on paying for.

What is a Chapter 13 Bankruptcy?

A chapter 13 bankruptcy differs from a chapter 7 in that you are required to file a petition including a plan for exactly how you will pay off some of your debts over the next three to five years. This is because a chapter 13 bankruptcy was created in order to allow a delinquent debtor the opportunity to save important assets like their home and car – which are often very important in order to continue working and leading a normal, productive life. This is important because many people may be behind on house and car payments, so the chapter 13 plan offers another way to keep these assets and still pay them off over time. The filing fee for chapter 13 is $185. As long as your payment plan meets the bankruptcy law requirements, you will be allowed to keep all of your property.

What Debts are Not Exempt From Bankruptcy?

 

Keep in mind, there are many forms of debt that are NEVER exempt from bankruptcy and a debtor will always be responsible for paying under penalty of law. These include, but are not limited to:

  • Money owed to a spouse for alimony or child support
  • Certain government fines or taxes
  • Debts discovered or that remain associated with your name, even if you did not list them on your bankruptcy petition
  • Loans you obtained falsely, such as under a fake name or social security number, and it has been discovered you were the actual debtor, as well as debts incurred from “willful and malicious” to another
  • Student loans owed to the government or school, unless a court decides specifically that the payment is not feasible and would cause “undue hardship”
  • Mortgage balances or liens on property which remain as long as the credit does not decide to sell the property in question.

 

Bankruptcy is a complex and difficult process. So be certain it is the right choice for you before you decide to file a petition. Many times, if you are not ready for bankruptcy proceedings, they can be delayed for filing mistakes or not fully understanding what is required of the petitioner. This could lead to further financial hardship and time wasted that could have been better used finding solutions out of debt.

Thursday, January 21st, 2010 financial Info

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