There are many who fear the term ‘bankruptcy’ and there is reason enough for it. However fear and assumptions have shrouded it with a layer of mystery and few are brave enough to decode it A good source of the latest information on bankruptcy would be – http://www.abi.org/.
Here are some basics about bankruptcy as explained by a bankruptcy lawyer San Diego.
A General Understanding Of The Term Bankruptcy
This is a legal status issued by courts to an individual or company when they are under heavy debt and are absolutely unable to pay them off. Once declared or going bankrupt, the courts intervene to recover dues through a legalized process.
Going bankrupt may appear like a simple option to avoid complication, when ridden under heavy debt. However, consult your legal advisor prior to doing so. You do not want to take this decision unless there was absolutely no other way out.
What Are The Consequences Of Filing For Bankruptcy in the United States?
The first major consequence is that the debtor is relieved of all or a percentage of debt. While this sounds like a welcome proposition to the debtor, there is a huge negative longstanding impact on one’s credit history. Applying to banks and financial institutions for loans to buy a car or a home or any other purpose, or seeking jobs, facing employers become arduous procedures once declared bankrupt and you may have to face many rejections.
Bankruptcy reflects on your credit report of a long duration, anywhere between 7 to 10 years depending on what chapter of bankruptcy you file under.
Does Bankruptcy Rid You Of All Obligations?
Bankruptcy does not absolve you of duties towards child support, alimony, personal loans you may have taken from friends and certain types of taxes. These payments continue to remain unaffected, their status is unaltered.
What To Expect Prior To Filing For Bankruptcy
If a court declares you bankrupt as a result of creditors approaching the court, the legal proceedings follow suit. If you, as an individual or company are considering bankruptcy, you have the option of receiving legal credit counselling. This is not mandatory, but if you choose to seek counsel, you will have to hire an attorney, which will therefore include a lawyer fee, or you can approach the American Bar Association for free counselling. The other expense you will need to factor in court fees. Applying for bankruptcy falls under the jurisdiction of federal courts and not state courts, which implies much steeper expenses. Ensure you are prepared for them.
What Is The Process Of Filing For Bankruptcy?
You can choose to file for bankruptcy under various chapters as advised by your legal counsellor.
Chapter 7 is the most common type of bankruptcy filed by individuals who are unable to pay loans long accrued. Upon filing you are relieved of responsibility towards repaying your loans. The courts can sell your assets and retrieve court and administrative fees and also pay off some of your debt. You may be allowed to keep some of your key assets – it depends on a case to case basis and differs from state to state as well. You will still be entitled to monetary pension, social security, veteran’s benefits etc.
Chapter 13 is another common mode of bankruptcy. It involves a grace period of about 3 to 5 years for loan repayment. This is an option chosen by the high income bracket who do not wish to liquidate their assets but have the capacity to repay through other means over a period of time.
Other options to file for bankruptcy are more specific. Chapter 9 is applied to cities, towns, municipalities for their restructuring, Chapter 11 is for reorganizing chosen by businesses or individuals, Chapter 12 is specific to farmers and fishermen, Chapter 15 is specific to cases where debt and assets are spread across different countries.
And as mentioned earlier, http://www.abi.org/ is a good source to look up for the latest developments on specific cases and more general information on bankruptcy.