Bankruptcy Law- Bankruptcy Laws
Bankruptcy is the legal process of the courts to forgive the debts
of an individual or a business due the inability to repay the debts.
For an individual the debts can be credit card, taxes, student loans,
car loans, home loans, taxes, personal loans, legal judgments, and
medical bills. The type of bankruptcy depends on the individual
and the amount of debts they are seeking relief. The two types of
bankruptcy are Chapter 7 and Chapter 13.
The reasons people have to file bankruptcy can be due to unemployment,
divorce, illness, or over extending their income compared to their
ability to pay the debts. The purpose of bankruptcy is to provide
financial relief for the individual from the debts while providing
notice to the creditors of the intent to forgive or arrange for
payments at a reduced amount.
Chapter 7 is the bankruptcy process of the court appointing a trustee
to collect the debtor’s assets to sell what is not exempt to pay
the creditors from the monies obtained by the sale of assets. This
the more common type of bankruptcy when the debtor has assets and
has a limited income to repay the debts.
Chapter 13 is the bankruptcy process of the courts to create a repayment
plan for the debtor based on future earnings. This type of bankruptcy
is frequently used when the debtor is behind on secured debts where
the debtor has assets that can be used for collateral for the loans
and debts.
Bankruptcy is designed to be helpful for the debtors with a substantial
amount of debt who have experienced a financial complexity leading
to the possible defaulting of loans or payments. The bankruptcy
will affect the individuals since it is reported to the three major
credit bureaus and remains on file for seven to ten years reducing
the chances of the individual to obtain further credit or loans
including credit cards, car loans, and possibly home loans. The
individuals when obtaining loans or credit cards will face higher
interest rates, possible denial of coverage by insurance companies,
housing by landlords, and employment due to the negative mark of
the bankruptcy. Individuals that file bankruptcy are considered
a higher risk for loans, employment, and housing.
It is possible to file bankruptcy without the assistance of an attorney.
The act is called “pro se” yet it is advisable to use the legal
representation due to the seriousness of the legal process. The
filing of bankruptcy requires filing correct paperwork with the
accurate facts and dollar amounts. If a person files incorrectly,
they face the possibility of losing otherwise secured or safe property
as well as having the bankruptcy dismiss due to the inaccurate information.
In some case, criminal charges can be filed due to the inaccurate
information being perceived as fraudulent by the debtor.
It is important to know the seriousness of filing bankruptcy when
there may be other options that will not result in the blemish on
the credit reports or loss of property due to the sale of assets
to cover the debts. There is also the very complex nature of the
process that requires legal assistance for the proper filing of
paper work and accurate information. The new bankruptcy laws have
requirements for individuals filing bankruptcy that have recently
changed, which have placed restrictions on the types of debts that
can be included in the bankruptcy. For this reason, it is highly
advisable to seek legal counsel or advice on the possible bankruptcy
filing.
|
