Like any legislation, bankruptcy law is complex which is why you should begin the process by consulting with an attorney. In a nutshell, the purpose of the law is to help individuals and businesses resolve their inability to pay their debts. Simply stated the bankruptcy court looks at all of your assets and liabilities, allows certain exemptions and then divides the net assets among the creditors. Of course, it’s never that simple because everyone’s situation is different and complications can occur at any stage.
The purpose of the bankruptcy law is to give honest people a way to get out of debt and start over again. The law does not help those who think they can simply avoid a debt they want to eliminate for whatever reason. This is an important distinction to understand. Filing bankruptcy is a serious decision with long reaching consequences on your credit, but for millions of people it is also a law that offers hope for a fresh start financially.
The bankruptcy law was revised in October 2005 largely in response to claims by creditors that it was too easy for people to claim bankruptcy just to avoid paying their bills. But if you are in serious financial trouble and cannot honestly pay your debts then the new bankruptcy law’s more stringent filing requirements will not delay your bankruptcy.
The bankruptcy law has many different sections that address both individual and business bankruptcies. The law’s intent is to distribute certain assets after statutory exemptions are excluded and then use the proceeds to pay off as much creditor debt as possible. The court determines which creditor gets what amount. All bankruptcies must go through federal district court, though each state has laws concerning the payments to creditors. This is just another example of why you need a bankruptcy attorney.
The bankruptcy law established “chapters” which merely indicates the kind of bankruptcy being filed. Chapter 7 is the one used most frequently by individuals. A court appointed trustee oversees the identification and selling of non-exempt assets and the use of the proceeds to pay debts. In reality, because assets such as a house and car may be exempted, there is often no asset liquidation required. Chapter 11 is used by large corporations that are reorganizing and need to restructure debt in order to survive. There is also a chapter 12 used by farmers and chapter 13 used by individuals asking for a court established and monitored repayment plan.
For individuals filing chapter 7 there are many different aspects to the law which can impact the final result. The law will not allow you to cancel some debts such as child support. The really good news is that you will not lose your home if your debt meets the rules for determining exempt equity. The same is true for your car. You are also allowed to retain cash accounts as long as the sum total does not exceed $10,000. The courts have recently ruled that retirement accounts like IRA’s are also exempt.
It’s easy to see that the new bankruptcy law has many complex provisions, but the goal of these statutes is to give you an honest chance to start over without a heavy debt burden. Your bankruptcy attorney will assist you throughout the entire process.
Finding bankruptcy information is not that difficult as long as you don't have to interpret it. The US courts even have a website where you can read all about the bankruptcy law, but it's also full of comments like, "Such advice may be obtained from a competent attorney, accountant, financial adviser." In other words, you need to hire an attorney that specializes in bankruptcies if you plan on making sure you follow the law and are taking advantage of all the remedies the law offers.
There is plenty of bankruptcy information that can apply in your situation, but there's just as much that has no bearing. But if you are like most people, you want a good idea of how the bankruptcy law can help you before you even consult with an attorney. Despite what you see on television, many people have never spoken with an attorney before this time. So it is good to read the basic bankruptcy information and have a general understanding of the law.
A bankruptcy is a process established by law to provide relief to individuals and businesses that are unable to pay their debts. Millions of individuals file bankruptcy every year. The first thing you do is find an attorney experienced in the practice of bankruptcy law in your state. Once you choose an attorney, you will be asked to complete several forms which list your personal income and expenses and your personal balance sheet. The information you provide will include both secured and unsecured debt.
The attorney will review your bankruptcy information and determine which chapter filing will give you the most relief. Once that decision has been made you will probably have little more to do. The court appoints a trustee that you must appear before, but chances are you will never have to go to court or appear before the judge. The attorney will do all creditor contacting. In fact, if a creditor contacts you once you have declared bankruptcy, the attorney will respond for you.
The one thing the courts and the trustee will not do is provide advice. The court is not there to counsel but rather to discharge debts or determine a fair repayment plan. The court is looking at both side of the issue – the creditors and the debtors. You have to remember that you incurred the debt and agreed to the terms of repayment.
With basic bankruptcy information in hand, you will know whether it is time to pursue debt relief through the courts. The best thing you can do though is to take advantage of the bankruptcy attorney's experience and knowledge. Once the bankruptcy is completed you can begin rebuilding your credit again. Though this will take some time, you will be amazed at how quickly you are able to improve your credit rating.
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