What is Bankrupt?–Another side of Bankruptcy Definition

Wednesday, July 6, 2011

Personal bankruptcy is a legal way to give people with overwhelming debt a fresh financial start. Many people do not realize that there are five types of bankruptcy options available under the U.S. Bankruptcy Code; however, for most consumers there are really only two viable options; Chapter 7 and Chapter 13 bankruptcy.

In chapter 13 bankruptcies, you may end up paying back 50% or more of your current debts. In most cases, debtors do not complete their chapter 13 bankruptcy repayment plans. Additionally, chapter 7 bankruptcy may stay on your credit longer than a chapter 13 bankruptcy. Most lending institutions will consider your bankruptcy when evaluating you for a personal loan even after the bankruptcy has expired.

Negotiations with creditors have failed. It may be time to consider bankruptcy.
Bankruptcy law evolved as a reaction to the abuses surrounding debtors prison. If a merchant filed a claim, the debtor was incarcerated until his debts were paid. As times have changed, though, so has the bankruptcy code. The Bankruptcy Decision

Traditionally, there is little or no nonexempt property in a chapter 7 bankruptcy. Chapter 13, bankruptcy is entitled Adjustment of Debts of an Individual with Regular Income: A chapter 13 bankruptcy is traditionally used for people who have a regular source of income or a full-time job. A chapter 13 bankruptcy allows the debtor to repay creditors over time. Unlike chapter 7 bankruptcy, the debtor does not receive an immediate discharge of their debts. The debts that are able to be discharged will vary under each chapter of the Bankruptcy Code. In order to file for bankruptcy, you must file a petition in federal bankruptcy court. Once you have finished filing bankruptcy, your creditors can no longer take action against you to collect discharged debts.

Negative Aspects of Bankruptcy
The decision to declare bankruptcy is not an easy one. Unfortunately, many bankruptcy attorneys recommend bankruptcy to just about anyone they consult with. All too often frightened consumers are advised to declare bankruptcy just to avoid a few debts. If the debts exceed the assets by a large percentage, you may wish to consider bankruptcy. Negotiate with your creditors
If the creditors refuse and continue to threaten garnishment tell them such action would force you into bankruptcy.

Contact Consumer Credit Counseling
Bankruptcy does not necessarily discharge all debts. If your debts are exempt from bankruptcy, filing will do very little to improve your situation. If a co-signer was used, the debt would then be owed by the co-signer, unless that person also declared bankruptcy. In community property states a spouse's assets and debts would also be included in the bankruptcy, assuming they are community property.

Non-Dischargable Debts - Bills You Have To Pay In Spite Of Bankruptcy
Certain kinds of debt cannot be automatically eliminated by bankruptcy filing. If most of your debts are non-dischargeable, bankruptcy may not solve your financial dilemma. Taxes
Even if you've been tied up in tax court for more than three years, any tax assessed within 240 days of filing for bankruptcy is non-dischargeable. If one spouse has agreed to assume more than half of marital debts in exchange for lower support payments, the court may not discharge all debts held by the spouse for bankruptcy. Consult an attorney if this situation applies.

Debts not discharged in a previous bankruptcy
If debts from a previous bankruptcy have been found non-dischargeable, they cannot be discharged in a later bankruptcy.

Debts not listed on your bankruptcy petition
Many people filing bankruptcy keep one or more credit lines with small balances or no balance out of the bankruptcy proceeding to preserve part of their credit resources. Be very careful when reaffirming debt. Other kinds of non-dischargeable debts can be discharged immediately if the creditor does not object If the creditor objects, these debts will be judged by the court to be either dischargeable or non-dischargeable. The creditor can ask that the debts not be discharged if they claim the following conditions existed.

Debts Incurred as a Result of False Written Statements
If you charge "luxury goods or services" in an amount over $500 within 40 days before filing bankruptcy, the debt is likely to be deemed non-dischargeable. Exempt Assets
The other states require a person declaring bankruptcy to use state exemptions.

One bankruptcy strategy is to sell non-exempt property before bankruptcy and convert it into exempt property. An automatic stay stops creditors from taking any further action until the case goes before a bankruptcy judge. The court will send notices of the pending bankruptcy to the creditors listed, who must cease all further collection action. If you have quite a bit of property or valuables, if you are trying to move money from non-exempt to exempt assets, if your creditors try to make your debts non-dischargeable because of fraud, or if there are any other complications, you may wish to hire an experienced bankruptcy attorney. If you have a very simple bankruptcy or can't afford an attorney, invest $15 in a good do-it-yourself bankruptcy book. Typing services am also available to type up bankruptcy forms. There are several legal guides devoted strictly to bankruptcy. The Filing Process

All the appropriate papers can be obtained from your local bankruptcy court. · A schedule describing your debts.
· A schedule listing exempt property.
· Bankruptcy Petition cover sheet.
· Mailing addresses of all creditors.

With most smaller bankruptcies, only the person filing and the trustee will attend. If a lot of property is involved, especially if it is nonexempt, property, your creditors may show up to protest any exemptions. If the creditors object to any of your exemptions, they have 30 days after the creditor's meeting to file an objection with the court. Corporations declare bankruptcy to get out of contracts or avoid legal judgments. Creditors fear bankruptcy, but they also realize that if they lend to someone who has declared bankruptcy, they need not worry about another bankruptcy for seven more years (you can only file once every seven years). Ask potential creditors about their policy toward bankruptcies.

The last point is, Bankruptcy should be used as a last resort when you are trying to pay off your debt.
Some people do find themselves in desperate situations and the only option for them is to file a bankruptcy. The most important thing that you do is to talk to an attorney who specializes in this type of debt elimination. In extreme cases such as this you need to know exactly which type of bankruptcy protection you are filing for. Remember that filing for bankruptcy should really be your last option.
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