People who are heavily in debts and are in no position to pay them back opt for filing bankruptcy as the last alternative. This gives them the freedom and opportunity to start afresh. Such cases are dealt with by the bankruptcy lawyers, and it is advised to file through them instead of directly since they will be able to guide debtors in the right direction. Federal courts deal with such financial bankruptcy cases.
The individual must give all the debt related information to the attorney so as to enable the lawyer to look for best possible options and advice. Filing for bankruptcy provides a fresh start in the credit area as most of the debts would be forgiven and the creditors will not be in a position to collection actions concerning the said debt.
Bankruptcy can be filed under three laws, Chapter 7, Chapter 11, and Chapter 13. Chapter 7 deals with straight bankruptcy, which involves the borrowers property being sold to clear the maximum debts. The entire process will be taken care of by a court-appointed trustee.
Corporations and businesses mostly use chapter 11 to file bankruptcy. Individual debtors do not use this law for filing bankruptcy, since this process involves a lot of expense and the rules and regulations involve a lot of complexity.
Chapter 13 is a wage earnerís bankruptcy, which involves the debtor paying off a portion of the debt each month from the monthly earnings. This usually is a long process and involves the debt being paid in small installments.
Individuals mostly prefer either the Chapter 7 or Chapter 13 while filing for a bankruptcy. Large companies prefer Chapter 11 or Chapter 13.
The bankruptcy case ends once the debtor has been able to pay off the debts either in full or by part as per the regulations in these three laws. The creditors can no longer hound the debtor once the case proceedings end.
Bankruptcy is always chosen when there are absolutely no other options. This is because the bankruptcy filing is recorded in the credit rating for 10 years or less, depending on the amount for which the case was filed.
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