Essential Bankruptcy Information

bankruptcy Information: If a person finds themselves in a difficult financial situation and they have tried all other avenues to effectively manage their debts, declaring bankruptcy as a form of debt relief is sometimes the only way out. The bankruptcy information source ‘Levine Breaking News’ suggests almost 2.1 million filed for bankruptcy in 2005; the most ever filed in a one-year period in history.

It is possible for creditors to request a bankruptcy declaration in an an attempt to recover the money they are owed, however, most applications are lodged by the bankrupt individual, company or organisation. Bankruptcy essentially allows a person to resolve their debts by dividing their existing assets up amongst their creditors and be officially absolved of any financial obligations they may have.

Once a person has applied for bankruptcy, they are protected by a legally imposed ’stay’ which prevents further action against them by their creditors. An important piece of bankruptcy information often overlooked is that a person seeking to filing for bankruptcy must get credit counseling from a government-approved organization within six months before they file for bankruptcy relief.

A list of US government-approved organizations is available at the U.S. Trustee Program (www.usdoj.gov/ust).

Declaring bankruptcy offers a person the chance to start again without the burden of past debts and this can be a liberating experience for some people. Although it solves an immediate debt problem, a bankruptcy declaration stays on a person’s financial records for a period of 10 years (in the US). This can prove a real burden in our credit based society and is another good reason to seriously consider all options before deciding on bankruptcy as a solution to a debt problem.

Bankruptcy laws vary from one country to another. In the US, bankruptcy applications are filed with the United States Bankruptcy Court. However, individual State laws can influence many bankruptcy cases which makes it difficult to generalise about national standards regarding bankruptcy. It is important to note that a declaration of bankruptcy does not relieve a person of their obligations regarding child support, alimony, fines or taxes.

There are six types of bankruptcy under the US Bankruptcy Code. The two most common are Chapter 7 and Chapter 13

A Chapter 7 Bankruptcy

This involves the liquidation of all assets (except those which are exempt, such as automobiles, work-related tools, and basic household furnishings). Some or all of a persons (non-exempt) assets may be sold by the trustee or simply turned over to their creditors. A person may only receive a chapter 7 bankruptcy discharge through Chapter 7 once every six years.

A Chapter 13 Bankruptcy

If a person has a steady income, the court may approve a repayment plan that allows them to use their future income to pay off a default during a 3-5 year period, rather than surrender any of their assets. After all payments have been made under the plan, the person receives a discharge of the debts. Detailed bankruptcy information about how to apply is available from various online sources.