1. What is “filing bankruptcy”?
Filing bankruptcy is a legal process that is used by a debtor in an effort to obtain relief from the debts they owe to their various creditors. The various steps involved in filing bankruptcy include gathering complete facts and records regarding the debts you owe and other financial matters, hiring a bankruptcy attorney, filing various bankruptcy forms as asked by your bankruptcy lawyer based on the type of bankruptcy you are claiming.
2. What does it mean by being legally bankrupt?
If an individual or organization files a petition for bankruptcy and the court releases its judgment in their favor, declaring them as bankrupt, the debtors are completely or partially discharged from the debts they owe. There can be two scenarios when a debtor is declared as bankrupt. He or she may have to sell off all their declared assets in order to settle the debts they owe. On the other hand, the bankruptcy court may allow them to continue with their business operation while paying off their creditors partially on a monthly schedule basis.
3. Who can file for bankruptcy?
The individuals or organizations that are not in a position to pay their debts with the available means and assets can file for bankruptcy. However, here you should note that bankruptcy laws have become far stricter now and you will have to meet high certain standards in order to be eligible to file for bankruptcy. As per the bankruptcy laws in the United States, an individual, a business organization, municipality, or family farmers can file for bankruptcy.
4. I am unable to pay the debts I owe but I want to carry on the business I am running. Which type of bankruptcy is the best option for me?
You may choose to go for the reorganization or rehabilitation bankruptcy, as described in chapter 11, 12 and 13. In this type of bankruptcy, you request the creditors to reduce their claims. For example, you may offer to pay 25 cents for each dollar you owe. You can pay the reduced amount of debt on a monthly schedule basis. This way, you get a chance to stay with your business operations while paying off your debts simultaneously.
5. I have filed for bankruptcy and I do not want to be disturbed by the creditors meanwhile. What are the legal options I have?
When you file for bankruptcy, you will get an “automatic legal stay of your debts” until the court gives a judgment in your bankruptcy case. During this period, your creditors will not be able to take any non-bankruptcy legal actions against you. Your creditors will not be able to legally compel you to make payments or pursue lawsuits etc. The procedure of this legal stay involves sending notice to your creditors to stay away from taking certain non-bankruptcy legal actions against you. If your creditors still try to make improper contacts to you, do inform your bankruptcy attorney regarding the same.
6. What is bankruptcy conversion?
Bankruptcy conversion is a procedure that allows you to transform from one type of bankruptcy claim to another. For example, if you have filled and submitted the chapter 7 bankruptcy form and now you want to claim for chapter 13 bankruptcy, you will have to cancel the old form and submit the new one with relevant details. However, bankruptcy conversion is not a free-of-cost service. You will have to certain amount as conversion fee.
7. Is it possible for the creditors to file a bankruptcy petition against their debtors?
The clause for involuntary bankruptcy allows the creditors to petition a court in an effort to get the debtors declared as insolvent so that the creditors could recoup as much money from the debtor as possible. However, the provision of involuntary bankruptcy petition is allowed only under Chapters 7 and 11. The creditors cannot file a petition for bankruptcy against their debtors under Chapter 13. What is more, if the court rejects the petition for involuntary bankruptcy, the debtor can ask the creditors to pay for the attorney fees and costs and various other expenses depending upon the specific case.
8. How many bankruptcy forms does a debtor need to fill and submit in order to file a petition for bankruptcy?
Your bankruptcy attorney may ask you to fill out any or all of the following bankruptcy forms.
•Voluntary Petition – If you are filing bankruptcy yourself
•Involuntary Petition – If the creditor has filed the court petition
•A list of Creditors that hold twenty biggest Unsecured Claims
•Summary of Schedules
•Schedule A – Real Properties you own
•Schedule B – Personal Property you own
•Schedule C – Property you have Claimed as Exempt
•Schedule D – Creditors that hold Secured Claims
•Schedule E – Creditors that hold Unsecured Priority Claims
•Schedule F – Creditors Holding Unsecured Non-priority claims
9. What are the expenses involved in filing bankruptcy?
While you are filing bankruptcy, you may have to pay for the following expenses.
•Bankruptcy Attorney fees
•Conversion fees – If you are changing the type of the bankruptcy claim at a later stage, such as converting the claim from chapter 13 to chapter 7
•Fees for credit counseling
•Amendment fees
•The reopening fees
•The splitting fees;
and much more depending upon your specific bankruptcy case.
10. What is Reaffirmation?
There might be the case when the certain debts you owe have been discharged after the court declared you as bankrupt, but you still want to pay the same. For example, you might have purchased a car on a car loan and you do not want to return the same even after the declaration of bankruptcy by the court. This is known as reaffirmation. In order to get you reaffirmation agreement, you will have to convince the court that the agreement is voluntary and nobody is illegally forcing you to do the same and that the reaffirmation agreement is in your best interest.
11. What are the situations in which the court may refuse to grant bankruptcy to the debtor?
Bankruptcy denials might be caused because of the following reasons.
•The debtor and the bankruptcy attorney hired by him or her could not properly explain the facts and records.
•The various declarations made by you are contradictory to each other.
•You could not obey the lawful orders imposed by the bankruptcy court.
•You tried to conceal or manipulate facts and records regarding your financial matters.
•You are a convict of bankruptcy fraud. For example, you tried to destroy or transfer certain properties in an effort to save those properties to be used in debt settlement.
12. How much does bankruptcy cost?
The cost of bankruptcy depends upon the nature and amount involved in your specific case and the kind of bankruptcy you are claiming. For example, if you have claimed for personal bankruptcy under chapter 7, all you may have to pay is just a small flat fee. On the other hand, if you have claimed for bankruptcy under chapter 11, it may cost you several thousand dollars.
13. What Are The Alternative Options To Avoid Bankruptcy?
Following are some of the alternative options.
•Hire a financial manager that could manage your finances and help you regain control of the same. Once your expenses and incomes are in your control, you can easily put your finances back on track.
•If you are a homeowner, you can refinance the same and use its equity to settle the huge piles of debts. You can even take benefit of the tax deductions in this regard.
•If you are availing any credit repair or debt consolidation services, make sure that company is highly credible.
14. Why should I file for bankruptcy?
In order to take a right decision in this regard, you must evaluate the following.
•The amount of debt you owe and the intensity of its impact on your financial life.
•Whether or not you are capable of paying off the debt.
•The risk factors involved in the same.
•The pros and cons of filing and not filing bankruptcy.
•Its affect on your social status and whether or not you will be able to live happily with that.
•The expenses involved in filing bankruptcy.
15. Am I eligible to request for bankruptcy insurance?
Yes, if you are among one of the following.
•If you are a self-employed person and have been declared as bankrupt.
•If you are a self-employed person and the court has approved your obvious incapacity to pay off the entire debts and have allowed you to reorganize the things to pay off the debts partially.
•If the bankruptcy has been declared for a commercial company and you are one of the business managers, administrators and working partners associated with that company.
16. Do I need to hire a bankruptcy attorney to help me with the bankruptcy proceedings?
Because of the complex nature of the bankruptcy laws, it is not an easy cake for a common person to be well aware of all the intricacies involved in the same. This is where only an efficient and experienced bankruptcy lawyer can help you out. Again, keeping in view the very fact that new bankruptcy laws are added very frequently, the need and role of an expert bankruptcy lawyer cannot be ignored.