What Are Personal Bankruptcy Laws?

The personal bankruptcy laws are the legal provisions that allow an individual to settle the debts they owe on much easier terms that fall within the means available to them. An honest individual can take advantage of the personal bankruptcy laws to give a fresh start to their financial life.

Ways To Use Personal Bankruptcy

There are two ways to use Bankruptcy services – voluntary and involuntary. As the term suggests, the voluntary personal bankruptcy is the procedure where the debtors himself or herself is filing bankruptcy petition. On the other hand, sometimes creditors in an effort to get their money back file a petition for bankruptcy against the debtors. If you are deeply drowned into debts and unable to think out a way to get out of this nasty situation, you had better file for personal bankruptcy yourself. Do not wait your creditors to file it for you because that will eventually maximize your trouble.

Advantages Of Filing Personal Bankruptcy

Those who are trapped in heavy piles of debts with all doors closed to pay off the debts can take advantage of the personal bankruptcy services. When you file a petition for bankruptcy, an automatic stay is legally imposed. This legal stay will save you from further harassments from your creditors to make payment. During the time while your personal bankruptcy is under trial, your creditors will not be able to take any non-bankruptcy actions that may include compelling you to make payments, etc. After you are declared as bankrupt, you can get relief from all your debts by settling them with your “non-exempt” resources and assets. This way, by filing bankruptcy, you get dual protection. While the bankruptcy case is pending, you get protection from the legal stay and after the bankruptcy is declared to you, you can easily release yourself from all kinds of financial responsibilities. Now you will have to start afresh.

Personal Bankruptcy For People With Regular Source Of Income

As per the bankruptcy laws, if you are among those who have a regular source of income, you cannot apply for liquidation bankruptcy. You will have to act according to the Chapter 13 Personal Bankruptcy law. As per this chapter, the court will propose you a repayment plan to pay off the reduced claims by the creditors. For example, you may want to pay 15 cents on each dollar and after the bankruptcy proceedings the court orders you to pay 25 cents on each dollar.

This way, your debts will be reduced to a very little amount. Now you will be liable to pay this amount of debt on a monthly schedule basis, as proposed by the court.

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.

The Risks Covered By Bankruptcy Insurance

There are several causes that can lead your business to certain unexpected huge losses. Such causes may include the following:

•Business interruptions
•Lawsuits by employees or customers
•Customer injuries
•And other litigations

All business losses caused by any such reason or reasons are covered under the bankruptcy insurance policies. The bankruptcy insurance mainly covers the following for a self-employed person.

•Depending upon your specific bankruptcy situation, the bankruptcy insurance may provide you the protection of your rights to child benefit and health care. But, you can get such protection for as much as four quarters. What is more, you do not even need to pay the contributions that year.
•If you have taken a bankruptcy insurance policy and you become bankrupt, you may also be provided a monthly allowance for the first six months. Depending upon your specific bankruptcy situation, this period may be less or more.

Who Can Apply For Bankruptcy Insurance?

Following people can apply for bankruptcy insurance.

•All self-employed persons who were granted bankruptcy. But, here, you must note that in order to be eligible to request for the bankruptcy insurance, personal bankruptcy is allowed only one time during the career. If you have faced bankruptcy a couple of times during your entire career so far, you will not be able to take advantage of the various bankruptcy insurance policies.
•All self-employed persons who have not been declared as bankrupt but are not able to pay off their debts because of the huge losses in their business venture are also eligible for bankruptcy insurance.
•If bankruptcy has been declared for a commercial company, the working partners, administrators and business managers can also apply for bankruptcy insurance.

Who Is Not Eligible For Bankruptcy Insurance?

If any of these things apply to you, you will not be eligible to take advantage of the bankruptcy insurance policies.

•You are a self-employed person and you have become bankrupt more than one time during your career.
•A criminal court has convicted you because of your bankruptcy.
•You are a convict of bankruptcy fraud. Bankruptcy fraud is the manipulation and concealment of the facts in order to organize your incapability to pay off the debts you owe to the various creditors.

How To Request For Bankruptcy Insurance

Requesting for bankruptcy insurance is easy. You can request the same from your social security fund. While you are requesting for bankruptcy insurance, make sure that you keep in mind the following things.

•You will have to submit your request before the end of the quarter following the quarter in which in which you were declared as bankrupt. For example, if your bankruptcy was declared on Mar 20, 2006, you will have to submit your request for the bankruptcy insurance before Jun 30th 2006.
•Likewsie, you will have to submit your request before the end of the quarter following the quarter in which in which your business activities were suspended because of your genuine incapability to pay of the debts.

This way, we can see that the more bankruptcy information you have, the better you can take advantage from the various bankruptcy services.

Do Not Cross Your Budget

If you want to get your financial life untouched from the hammer of personal bankruptcy, the first and most important thing that you should do is not to cross your budget. You will have to learn to live within your means. Stay away from all such financial activities that can put you into debts. If you are using credit cards, you will have to very wise in charging the same. You must inculcate a habit to review your budget. Cut down on your expenditures wherever possible. I must add that more than sixty percent of the bankruptcy is followed by huge credit card debts. Credit card debts rise very fast because of the high interest charged by the credit card companies. Therefore, if you can manage without credit cards, it is just great.

Early Identification of the debt problems

Filing for bankruptcy is a situation that comes only if you realize things at a very late stage. If you are capable enough to identify the various debt problems at an early stage and get a solution for the same, you will never see face the heavy nights of bankruptcy in your financial life. You will have to learn to be proactive to the problems associated with various kinds of debts. You can put it in another way that you will have to control your debts much before your debts start controlling you. If you identify your debt problems at an early stage, you will have more time to put your finances back on track. The reason why most people claim bankruptcy is because of their habit of being hasty with their debt problems. This leaves no time for them to regain control of their finances and they eventually end up filing bankruptcy.

Impacts of filing bankruptcy

Some people have the misconception that filing for bankruptcy gives them an opportunity to re-decorate their financial life by getting away from old credits and acquiring new ones. Well, this is not how wise people think. It is very important for you to understand that filing for bankruptcy has very long lasting negative impacts on your financial life. You may have to struggle hard in order to regain control of your finances. Therefore, even if you are deeply drowned into debts, you are advised to first talk to your creditors and get to some common terms. If the creditors are ready to work out some arrangement for you, it will be a great help for you to avoid bankruptcy. You can also take certain initiatives from your side. For example, you may try paying off the debts by getting a part time job or by selling your assets.

If you want to avoid filing for bankruptcy, you can also avail the services of a debt consolidation or debt settlement company. Always remember that bankruptcy should always be the last option for you. It is important for you to understand that bankruptcy services is not an option you should choose to go for, rather it is an option that you are forced to go for.