Involuntary Bankruptcy

When the creditors with an objective to recoup the money they have lent to debtors are filing bankruptcy against the individual or organization, it is termed as “involuntary” bankruptcy.

Voluntary Bankruptcy

On the other hand, when the individual or organization that owes huge debts file a bankruptcy petition themselves, it is termed as “voluntary” bankruptcy.

Rehabilitation Or Reorganization Bankruptcy

The reorganization bankruptcy provides the debtor an opportunity to survive insolvency, as they are allowed to carry on with their venture. All they have to do is to reorganize their debts and the available means in a way to partially satisfy their various creditors’ claims. The bankruptcy court may also suggest or demand a repayment plan from the individual or organization that how they are going to achieve this. This type of bankruptcy is also known as Chapter 11, 12 or 13. All of these chapters allow the debtor to continue with their business operations, but they are obliged to pay off their debts partially on a monthly schedule basis. Chapter 11 and 12 provides the liberty to the individuals and the business debtors to reorganize their assets and means in a way to regain control of their finances and make arrangements to pay off the reduced claims of the creditors simultaneously.

On the other hand, chapter 13 bankruptcy rules state that a trustee will be appointed that proposes a repayment plan for the debtors, which the debtors are obliged to follow. The debtors are also required to pay a substantial amount of money to the trustee as fee. The greatest advantage of filing for bankruptcy of this type is that it allows you to remain in the specific business venture you are running while you get enough time to repay the reduced claims of the creditors. For example, if the total amount of debt you owe is $10,000 and the court allows you to pay 75 cents on each dollar, you will only have to pay $7500. What is more, you can repay this amount in monthly installments as described by the proposed plan of chapter 13 or the common arrangements you make with the consent of the creditors. You are supposed to make the repayment from your bankruptcy attorney’s office. Once you pay off all of these reduced claims, the court will issue you a bankruptcy release.

Liquidation Bankruptcy

On the other hand, the liquidation bankruptcy, as the term suggests, leads the debtor to insolvency that involves selling off their assets in order to satisfy their creditors’ claims to the maximum possible extent. The liquidation bankruptcy is also referred to as Chapter 7 of bankruptcy laws. As per this chapter of the bankruptcy laws, a trustee is appointed to review the assets and other financial means available to the debtors. All of these assets are seized and then sold off by them in an effort to pay the creditors the maximum amount of debts as possible. Because of its nature, filing bankruptcy of this type is also termed as “Straight bankruptcy” by many. Find a chapter 7 bankruptcy attorney to get started with the process.

Chapter 7 Bankruptcy

When you consult the best bankruptcy attorney, he/she will tell you that personal bankruptcy can be filed under Chapter 7 or Chapter 13. Under Chapter 7 all the non-exempt assets of the debtor are liquidated to pay off the creditors. The debtor party is; however, allowed to keep some exempted property, like clothes, some real estate, personal things, food, tools of trade, etc.

Chapter 13 Bankruptcy

Under Chapter 13, your personal bankruptcy attorney will inform you that you would be put on a payment plan. In order to qualify for Chapter 13 you need to have a stable source of income so that you can make the payments according to the payment plan. You will be able to retain all your properties as long as you make the payments. Once you have made all the payments you will obtain a discharge from all debts incurred.

Once you have filed Chapter 7 or Chapter 13, your creditors can no longer undertake any action. In other words your creditors will be forbidden from calling you, going for foreclosures, repossessions, etc.

However, when you file for bankruptcy you must remember that there are certain debts that one cannot do away with under both the chapters. Alimony, child support payments, federal and state taxes, student loans, fines, and some other debts cannot be liquidated. Your personal bankruptcy attorney will tell you beforehand about all the debts that you need to pay for.

Today filing for bankruptcy is not a simple thing. When people file for business bankruptcy, it is understood that one would need a business bankruptcy attorney. However, many people still make the mistake of taking up their own case when filing for personal bankruptcy. It is very important that one understands that whether it is business or personal bankruptcy, it cannot be done without the assistance of a bankruptcy attorney who specializes in that particular field.

It is important to hire a bankruptcy lawyer because bankruptcy is a difficult nerve-wrecking time. The whole volume of paperwork can leave you stressed out if you tackle it alone. With the personal bankruptcy attorney by your side you will feel more comfortable and relaxed.

Filing Bankruptcy Is A Legal Process

When it comes to filing bankruptcy process, the first thing that is very important for you to understand is that filing bankruptcy is a legal process. Therefore, every decision you take in this regard must be well informed. You must have the idea of the consequences that your improper bankruptcy actions may bring for you. For example, if you are filing bankruptcy under chapter 7 bankruptcy code, but at a later stage, you come to know that chapter 13 bankruptcy is the right option that you should go for, you will have to fill out a conversion form. You will also require paying certain amount to the bankruptcy court as conversion fee.

Type Of Bankruptcy You Should File For

When it is about filing bankruptcy process, the first thing that you need to decide is the type of bankruptcy you should file. Therefore, it is important for you to be aware of the various bankruptcy chapters. For example, there are four main bankruptcy laws under four different chapters of the bankruptcy code. You need to have the basic understanding of all these chapters in order to save yourself from the hassle that you may have to face if you are trying to change the bankruptcy type in the bankruptcy forms at a later stage.

Meeting The Various Parties

After you filled the bankruptcy forms and submitted the same to the bankruptcy court, the next big thing in the filing bankruptcy process is to have a meeting with the various parties involved in your bankruptcy case under the guidance of your bankruptcy attorney. It is better to have the meeting with your creditors in the presence of the bankruptcy attorney hired by you and the lawyers hired by your creditors.

Overall, the better you understand the filing bankruptcy process, the smoother your bankruptcy proceedings will run. Therefore, you had better be well informed.

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.

One should consider a debt consolidation loan to get his finances back on track. The loan amount would not only take full control of all your debts but also save you from the stress that you might be facing due to the pressures of multiple loans. A majority of the outstanding debt would be converted into one single payment with a lowered interest rate which in turn would ease the burden.

Benefits Of A Debt Consolidation Loan

•A loan need not necessarily be based on a home mortgage. A debt consolidation loan without mortgage is easily available with most debt relief agencies.
•The monthly payments would reduce by almost 50%, besides the individual’s credit rating is also kept under check.
•The loan amount helps the individual sort out his financial problems and eventually avoids his having to file for bankruptcy.
•Even the creditor harassment faced by the debtor gets sorted out.
•A single monthly payment makes matters easier to manage and the person under debt is relieved of all late charges or any other kind of hidden costs.
•A single monthly payment makes matters easier to manage and the person under debt is relieved of all late charges or any other kind of hidden costs.

An individual seeks debt consolidation when he is close to defaulting on payments due to outstanding debts and he sees no other way out. One must understand that taking a consolidated loan does not mean that he is relieved of his debt amounts. Instead, the company that offers him the provision just works with the individual to put his finances back on track by consolidating all the loans for him. Also, it gets increasingly important for one to know that after he has taken a debt consolidation loan, he is bound to make his monthly payments regularly.

Compare a few quotes before you finalize on the company that you would be applying to for a loan. Debt consolidation loan without mortgage is the only way out to save oneself from any further kind of humiliation. The credit rating of an individual is not checked while sanctioning the loan. Though it is a known fact that the lower the credit score, the higher are the chances of receiving a loan that has a steep interest rate.

Debt Consolidation

Debt consolidation is perhaps the best and most common bankruptcy alternative available to you. Debt consolidation is a service offered by various financial institutions. When you choose to go for this service, you are assigned a credit counselor who works hand in hand with you to help you regain control over your finances while paying off the consolidated debts simultaneously. Another advantage of consolidating your debts is that the interest rate gets reduced and the repayment duration may also be extended to give you some more time to pay off the debts. However, you have to be very careful in choosing the debt consolidation company because these days due to the high demand of such companies, some unscrupulous companies have also joined the debt consolidation market. You will have to stay away from such companies because instead of helping you getting out of the deep burden of debts, they will eventually increase the same and make the situation much worse than ever for you.

If you are using debt consolidation services as a bankruptcy alternative, you will have to make sure that it helps you get your debts reduced at a much lower interest rate that too for a longer period. If you do not find the debt consolidation service cheaper for you, you had better look for some other bankruptcy alternative.

There is a very strange misconception between lots of people that bankruptcy will take away all their financial burdens and they will no longer be liable to make payments for the debts they owe. Therefore, it is important for you to understand that bankruptcy may help you reduce the creditors’ claims but they will never let you get away from all the debts. In the worst case, all your assets will be sold to pay off your debts. In other cases, you may be proposed a repayment plan to settle the debts on a monthly schedule basis. Again¸ the social stigma that bankruptcy brings for you is also its one of the worst disadvantages. Therefore, if you do not want to add more worries to your financial life, it is always recommended for you not to go ahead on the thorny path of bankruptcy. You had better reach an easier solution through some bankruptcy alternatives as discussed above.

Some Fast Facts Regarding Claim In Bankruptcy

There are certain things associated with claim in bankruptcy that the debtors and creditors must be aware of.

•”Proof of claim” and “claim in bankruptcy” are not different documents. They are the same document with different tags. The document filed to register a claim against the assets of the bankruptcy estate is known as “claim in bankruptcy”. However, in the United States bankruptcy court, this document is also referred to as “proof of claim” in proceedings.
•The claim in bankruptcy must include the total amount of debt that is due to the debtor as of the date of the bankruptcy.
•The creditors may also submit claims for some priority status if that is relevant.
•A trustee is appointed by the bankruptcy court in order to handle the various claims in bankruptcy.
•When the trustee receives the claims, the first thing they will do is to notify the creditors (the claimants) whether their claims has been accepted or declined. Sometimes the claims in bankruptcy are accepted but at a reduced amount. Such things usually happen in case of chapter 13 bankruptcy where the debtor is allowed to continue with its operation while they have to pay off the debts simultaneously based on the suggested repayment plan.

Reasons Why Claims In Bankruptcy May Be Rejected

Following are some the reasons because of which the bankruptcy court may reject the claims in bankruptcy.

•The claims in bankruptcy may be rejected if the claims have not been liquidated. For example, if the creditors are claiming for the damages for such pain and suffering for which the judgment debt cannot be held responsible, their claims may be rejected.
•If the bankrupt is entitled for some special set offs as per the law and the claims do not take care of the same, it may also become a valid reason for rejection of the claims in bankruptcy.
•Disputed claims may also be rejected. For example, if there is a dispute regarding certain amount of debt, such as a bill for defective goods.
•If the priority statues as mentioned by the creditors in the claims in bankruptcy document is much higher than they are entitled to, their claims will usually get a straight rejection. For example, if the creditor is ordinary and is claims priority to estate assets, his claims will be objected.

When a claim in bankruptcy gets rejection, the bankruptcy court may set a hearing for the same.

Repayment Plan

The main characteristic of the chapter 13 bankruptcy code is that it allows the debtor to carry on with the specific business they are running while paying off the creditors on a specific repayment plan. Either such plans are suggested by the bankruptcy court or the debtor may also like to offer the same. In usual circumstances, the debtor is asked to make a plan and submit the same to the bankruptcy court for approval. As per the various Chapter 13 rules, the debtor is held responsible to make the repayment plan and submit the same within fifteen days from the day of filing of the court petition for bankruptcy. The debtor has to mention each and every detail in the repayment plan that how the various creditors will be paid off and how much will be paid off. The debtor will also have to specify the terms. For example, if the debtor wants the creditors to reduce the rate of interest, as per the chapter 13 rules, they will have to specify the same in the repayment plan. Before the bankruptcy could give its approval, the consent of the creditors is sought. If the creditors agree with the repayment plan as made by the debtor, the same is instantly approved by the bankruptcy court. As per the chapter 13 rules, the bankruptcy court also appoints a trustee to keep an eye on the business activities of the debtor and if he or she is following the repayment plan properly or not.

One important aspect of the chapter 13 rules is that it is mandatory for the debtor to include all the sources of future income with its full details in the repayment plan. What is more, the priority claims must be provided for in full. The provision for the deferred payment is only for the creditor’s claims with less priority status.

The Objective Of Chapter 13 Bankruptcy

The primary objective of the chapter 13 bankruptcy is to protect both the debtor and its creditors. By suggesting the repayment plan, the bankruptcy court protects the creditors and they can expect to get their money back. On the other hand, by allowing the debtor to continue with their business, the court gives them an opportunity to reorganize their finances.

How To Qualify For Chapter 13 Bankruptcy

Following are some of the qualifying criteria for chapter 13 bankruptcy.

•The first and most important thing is the amount of regular income that is guaranteed with the debtor. The income must surpass the reasonable living expenses for the debtor and his or her dependants. This is just to make sure that the debtor will have enough money to pay off the debts that they owe to various creditors on a fixed monthly schedule basis. The good news is that in some cases, the debtor may offer to pay off only a certain percentage of the total amount of debt and the bankruptcy court may approve the same. For example, the debtor may offer to pay 25 cents on every dollar. In most cases, the creditors’ claims are usually reduced.
•Before you file for chapter 13 bankruptcy, you are also supposed to have a meeting with a credit counselor at least 6 months before applying for bankruptcy. The meeting will be a proof that you tried your best to get things back to normal and regain control of your finances, but failed.
•It is better if you have also attended certain money management classes on your expense before filing for chapter 13 bankruptcy.

Overall, we can say that chapter 13 bankruptcy is for those who have a regular source of income and who are not willing to stop their business venture. People with no guaranteed source of income cannot apply for chapter 13 bankruptcy. However, the bankruptcy attorney will give you better suggestions in this regard after studying all the minor and major details regarding your specific case. Therefore, do consult with your bankruptcy lawyer before you go ahead and file for a specific type of bankruptcy.

What Is The New Bankruptcy Law Change All About?

The latest bankruptcy law change is the addition of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 to the bankruptcy court of the United States.

When Did The Last Bankruptcy Law Change Come Into Effect?

The last bankruptcy law change in the United States bankruptcy code came completely into effect on October 17, 2005. However, the new bankruptcy laws in this regard was passed by Congress and signed into law by President Bush in April 2005. Some of the changes came into effect immediately, but it took one hundred and eighty days for the new bankruptcy law changes to come completely into effect.

What Is Bankruptcy Abuse Prevention And Consumer Protection Act Of 2005?

As per the new bankruptcy law change, now those who want to file for chapter 7 bankruptcy will have to pass a means test. The purpose of this means test is to assess whether your current monthly income is above the median income in your state. If your current monthly income is less than the median income of your state, you can qualify to apply for the chapter 7 bankruptcy. On the other hand, if the income is above the median income of your state and you are able to pay off your debts to the extent of at least hundred dollars a month, you will not be able to file for chapter 7 bankruptcy. In that case, your bankruptcy case will proceed under Chapter 13.

Is It Important To Show Federal Tax Returns To File For Chapter 7 Bankruptcy?

Since the time the new bankruptcy law change has come into effect, it is not essential for people applying for chapter 7 bankruptcy to show the federal tax returns from the last tax year. Therefore, if you have not paid taxes for the last year or for the last few years, you will have to pay the taxes first in order to be eligible for the chapter 7 bankruptcy.

Credit Counseling Is Also A Must

As per the new bankruptcy law change, now it has become mandatory for you to go through some sort of credit counseling on your own expense. It is also important for you to understand that the credit counseling you go through must be a government-approved program. It is better if you have also participated in a government-approved financial management education program. This will help you qualify for filing chapter 7 bankruptcy easily.