Bankruptcy is when an individual or company files for protection under the United States Bankruptcy Court. Generally, an individual or company is under strain from trying to pay all of the debts. After struggling for months to even years, bankruptcy can be the best option for resolving these issues. The Bankruptcy laws enable you to protect your wages and your assets while you eliminate or repay some or all of your debt.
The most common method of filing bankruptcy for an individual is called Chapter 7 Bankruptcy. Chapter 7 Bankruptcy refers to the actual chapter within the United States Bankruptcy Code that deals specifically with this form of bankruptcy. Chapter 7 Bankruptcy is commonly referred to as a “fresh start” or a complete bankruptcy. It provides a way for individuals to be discharged from certain debts and gain a fresh start in life. Chapter 13 Bankruptcy allows individuals to propose a 3 to 5 year payment plan to pay back some or all of your debt. Chapter 11 Bankruptcy allows businesses to submit a reorganization plan while receiving protection from their creditors. From the time an individual or business files for bankruptcy, all creditors must “stay” or stop any further collection efforts until the bankruptcy and court system has reached a resolution.
There are several steps that must be followed in a bankruptcy.
For all types of bankruptcies, a petition must be filed with the Bankruptcy Court in the district where the debtor lives.
The Court appoints a Bankruptcy Trustee to review the debtor’s information and to proceed with the bankruptcy process. Additional documentation may be required depending upon the case and Trustee. A meeting with the Trustee and creditors, where creditors and the trustee can ask questions, is scheduled shortly after the appointment of the Trustee. The Bankruptcy Court will then make it’s determination based on the Trustee’s recommendation.
In general, the Bankruptcy Court will issue a discharge, or approve the recommended plan payments. A discharge means that the borrower is now discharged and no longer liable for the debt that was listed in the bankruptcy filing.
While the bankruptcy process can seem overwhelming at times, the ability to obtain relief from the burden of debt and start a new is worth the price.