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.

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.