In the modern scenario, we can find many people trapped in a large quantity of debt. The reason lies in the easy accessibility of credits and loans compared to the past. Nowadays, we often experience the continuous bombardment of tempting advertisements narrating how easy it is to get a quick loan. We often get lured by these card invitations, advertisements and the tempting advantages these cards do offer. No wonder, most of us land in a situation where our monthly expenditure is more than our monthly income. The result- naturally, Bankruptcy!
Debt can have very adverse consequences. It can affect you both financially and psychologically. That's why it is of immense importance to get quickly into action to solve this problem. There are ways like negotiation or seeking help of debt Management Company. But if it is too late to solve this financial mess, then don't get dishearten. There is still a way out. In such situations, filing for bankruptcy is often the most sensible answer.
Filing for Bankruptcy
Congress has created Bankruptcy Law to help people trapped in such debts and who need help to get a fresh start in life. For Many people it is often an embarrassing situation to file for bankruptcy. They feel very uncomfortable when it comes to exercising their right to file for bankruptcy. But for most of the people, this can be their lifetime chance for getting a new financial lease. Although, a recent amendment in the previous law has made it much more difficult to exercise the filing for bankruptcy, it is not still impossible. Certainly, the procedure has been lengthened a lot compared to past; there are expert lawyer firms and counseling centers to help you out to exercise your constitutional right.
There are different options available to file the bankruptcy and you have to find out which option suits you most with the help of your experienced lawyer. Basically, there are two main types of bankruptcy, known as chapter 7 and chapter 13.
Chapter 7 Bankruptcy
This is the most common type of bankruptcy is also known as straight bankruptcy. The proceedings involve liquidation of the entire borrower's non-exempt property. The amount that is obtained through selling of these assets is then turned over and dispersed among his creditors to pay the debts. Certain assets are exempted under this chapter like your house, your car, your tools of work and business, and a number of personal items. This exemption varies with the state and federal laws.
After completion of the bankruptcy proceedings, the court discharges the borrower from all his debts. He is no longer legally responsible for the debts. Then he can start over his new life with a clean slate. Still, for next 10 years, the record of the bankruptcy remains attached with his credit history.
Eligibility - Person having residence, property or business in the United States can file for chapter 7. Again, the person should not file the bankruptcy to get out of debt. It will be only considered as valid if borrower lacks sufficient funds after living expenses, to repay debt. Additionally, he should not have any history of Chapter 7 or 16 bankruptcies in the past 6 years and should not have applied for the same which has got dismissed in the last 6 months.
Procedure - It is intended to help candid citizens who have inadvertently landed themselves in a financial trouble. At first, several forms are needed to be filled out to give all the information. Try to use computer generated data to fasten the processing. Around 40 days after filing, you have to attend the court for the First Meeting of Creditors. After the meeting, the court discharges the person of all debts within 70-75 days.
Chapter 13 Bankruptcy
Individuals who are in possession of valuable assets like a home or other property that is not covered by exemptions of Chapter 7, generally prefer Chapter 13. By filing for Chapter 7 they can lose their valuable property.
Here, one has to understand the most important and distinguished aspect of this bankruptcy. Contrary to Chapter 7 bankruptcy, it does not release all due payments immediately. On the contrary, the debtor offers to pay the debt to the creditors over a short period of five years. He has to plan monthly payments and then submit a payment schedule to the court.
Eligibility
To be considered as eligible for filing, the individual should not have secured debts over $750,000 and unsecured debts over $250,000.In case of possession like vehicle, the secured creditor retains the right of full disbursement of due payment if the date of purchase lies within 30 months from the date of filing. Again that individual should not have received a discharge under the same clause within last 2 years or under chapter 7, 11, 12 within last 4 years. Debts due to student loans, penalties for criminal offenses, drunken driving injuries are not liable under chapter 13.
Procedure
The first step involves the filing of the petition with the court corresponding to the residential area of debtor. Within 15 days of filing the petition, he has to submit the plan of scheduled payment. Court then appoints an impartial trustee who works as a link between creditors and debtors. Within 30-50 days of submitting plan, a meeting of creditors is called. The judge then validates the repayment plan taking all aspects into account. After confirmation of the plan, it is solely debtor's responsibility to release the payment on due dates, failing to which poses a threat of reverting the case to chapter 7.
It is always better to seek an advice and help of an expert lawyer while filing.
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