Bankruptcy is a legal situation, in which the debts of an organization or individual cannot be repaid to their creditors. Most people are usually unaware of the legalities involved, so here is some basic information, about declaring yourself bankrupt.
The most important part of bankruptcy information is that it can be either voluntary or involuntary. In the voluntary kind, the individual files for it on his own. In this case, the person files a petition called a Statement of Intentions (SOI), to let the court system know that he is filing for bankruptcy. Alternately, the involuntary kind occurs, when a creditor/s files for the same on behalf of his debtors, in a bid to recover a portion of the finances owed.
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Another significant bit of information is that a person is not guaranteed of being declared bankrupt just because he has filed the SOI. The courts spend time garnering information via the many forms which the debtor fills out. This information permits the courts to understand the debtor's financial history and debts. It is only after this that the courts decide whether he can proceed to the actual legalities.
There are six types of bankruptcy, of which chapter 7 bankruptcy is the most common. In fact, nearly 65% of all U.S. consumer filings about going bankrupt are made under this category. Here is some information about chapter 7 bankruptcy. In this, a debtor gives up his non-exempt assets to a bankruptcy trustee. Then, it is the latter that is responsible for liquidating the property and disbursing the proceeds to the creditors. In exchange for this, the debtor gets a reprieve from some of his debt. However there is a clause which dictates that this debt cannot be discharged if there is some inappropriate behavior on the debtor's part. Also, there are some kinds of debts (such as spousal and child support, educational loans etc) which cannot be discharged, even if the debtor is free from his overall debt.
Moreover, this is available to the claimant only once in eight years. Some amendments were made to the law in 2005, by virtue of which, anyone claiming to go bankrupt has to first take a 'means test.' Failing the test, either disqualifies the person from filing for chapter 7 bankruptcy or his case is transferred to chapter 13. Contrary to chapter 7, chapter 13 usually allows the person to retain his assets provided he meets all the other requirements set down for him. It thereby provides a repayment plan which is affordable for both debtor and creditor. Usually, in chapter 7 bankruptcy, the trustee sells off most of the assets belonging to the debtor. However, some of the debtor's assets are protected, such as Social Security payments and unemployment compensation. These exemptions however, vary from state to state.
One important bit of information to keep in mind is about the 'automatic stay' order. This is applicable to all the types of bankruptcy filings. In a nutshell, it means that any claim of going bankrupt, calls for the automatic stoppage of lawsuits, repossessions and foreclosures, among other such procedures.
According to bankruptcy information, although a debtor does not essentially require the services of a lawyer for such filings, it is advisable to engage a lawyer for this process. Many people shy away from doing this on account of the fear of the extra costs related to the legal services for the information and filing. However, most attorneys are aware of the difficulty of such situations and they offer their services at much lower costs. In fact, it is also possible to obtain the initial information from some lawyers, free of cost.
It is a big decision to declare bankruptcy. Therefore it must be taken and all the formalities completed with the utmost care and thoroughness. If that is so, then the only energy expended will be to get back on the road to recovery.
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