Bankruptcy is a legal term that declares that the person or organization declared bankrupt is unable to pay the debts they owe to their various creditors. However, it is not necessary that all the debts will be included in the bankruptcy discharge. It depends on the way the case has been debated by the debtor and his creditors in the bankruptcy court. The debtor filing for bankruptcy will be responsible to pay off any debts that the court decides to exclude from the bankruptcy discharge.
Purpose Of Filing Bankruptcy
There are basically two main purposes to claim bankruptcy.
•If the debtor is declared as bankrupt by the bankruptcy court, they get the opportunity to rebuild their dilapidated financial life, as bankruptcy relieves them of most of the debts. A bankrupt individual or organization is not legally obliged to pay most of the debts he/she owes.
•If certain debts have been excluded from the bankruptcy discharge, the debtors are responsible to pay the debts on priority basis but only to the extent of the available means with them. The available means are the non-exempt assets submitted by the debtor to the bankruptcy court.
Types Of Bankruptcy
There are basically two types of bankruptcy – Liquidation Bankruptcy and Rehabilitation or Reorganization Bankruptcy. In liquidation bankruptcy, the assets of the debtors are seized and sold off to pay the debts they owe to their creditors. On the other hand, reorganization bankruptcy allows the debtors to carry on with their venture and pay the debts in monthly installments. Here, you must note that the debtor is not supposed to pay the entire amount. All they have to pay is the reduced claims made by the creditors. Depending upon your specific situation, you can choose the type of bankruptcy services for you. Your bankruptcy attorney will help you reach a wise decision in this regard.
Legally Imposed “Stay”: Protection Of The Debtor
When a bankruptcy petition is filed either by the debtor or the creditors in the bankruptcy court, the creditors cannot take any non-bankruptcy legal action against the debtor because of the legally imposed “Stay” during the time while the bankruptcy case is pending, awaiting judgment. The non-bankruptcy legal actions may include forcing the debtor to make payments of the debts they owe, pursuing lawsuits, garnishing wages etc.
Bankruptcy Fraud
Bankruptcy fraud is an attempt to manipulate with the financial facts by the debtors in an effort to save them from paying off the debts they owe. Such manipulation of facts may include concealment while declaring the available means and assets, destroying or concealing some relevant documents, false declarations in the United States Bankruptcy Court etc.
Bankruptcy Laws
As per the bankruptcy laws in the United States, six types of bankruptcy have been mentioned under six chapters.
•Chapter 7 Bankruptcy – Personal bankruptcy for both individuals and businesses
•Chapter 9 – municipal bankruptcy
•Chapter 11 Bankruptcy – rehabilitation or reorganization bankruptcy
•Chapter 12 Bankruptcy – reorganization bankruptcy for family farmers and fishermen
•Chapter 13 Bankruptcy – rehabilitation or reorganization bankruptcy for people who have a regular source of income. Sometimes also termed as Corporate bankruptcy
•Chapter 15 Bankruptcy – international bankruptcy cases
The Role Of Bankruptcy Lawyers
Because of the complexity involved in the bankruptcy laws, the importance of hiring a bankruptcy attorney to bring bankruptcy help for you cannot be ignored. The bankruptcy lawyers are the people who are well aware of all the ins and outs of the various bankruptcy situations and the various steps in filing bankruptcy. Again, new bankruptcy laws also get included from time to time, which is very difficult for a common man to be aware of. Only an efficient and experienced bankruptcy attorney can help you in this regard.