Bankruptcy

If debt consolidation, debt management plans, and debt settlement did not work for an individual, he is indeed in a lot of trouble. Thinking about all the loans they are expected to pay, and thinking about where to get all the money to make the payments can be emotionally and psychologically exhausting. Aside from these stresses, individuals unable to pay off their debt may face harassment from creditors, whether physical or emotional. Yes, going bankrupt could entail all of these. If all else fails, an individual or organization must contemplate filing bankruptcy to obtain protection from the government under bankruptcy laws.

Bankruptcy is the incapacity of an individual or organization to fulfill their debt obligations with their creditors. It is the final resort that individuals and businesses consider after getting totally buried in numerous debts. Bankruptcy is a court process in the United States, a federal one, which filers undertake for debt elimination. If debt elimination is not possible, bankruptcy filers are given practical payment plans under protection by the US bankruptcy court.

There are many types of bankruptcy – several chapters defining laws on these different types. These are chapters 7, 9, 11, 12, 13, and 15. Among these the most commonly filed in the United States for personal bankruptcy are Chapter 7 bankruptcy and Chapter 13 bankruptcy. Chapter 7 bankruptcy is basic liquidation type for individuals and organizations. When this is filed, the filer surrenders his property to a bankruptcy trustee. This trustee sells the property in order to pay as much of the filer’s debt as possible. The debtor is then discharged from certain debt obligations, except for spousal support and specific taxes. Under the 2005 new bankruptcy law, it has become a more restrictive process to file Chapter 7 bankruptcy. This ensures protection against bankruptcy fraud.

Chapter 13 bankruptcy, on the other hand, is a rehabilitation variety. If the filer has enough disposable income, he can afford a Chapter 13 payment plan to pay off his debt in 3 to 5 years. Across this duration, the debtor is protected and he cannot incur any additional debts from his creditors. Creditors also cannot forcibly collect payment from the debtor, unless the process passes through the federal bankruptcy court. For businesses, Chapter 11 bankruptcy is more commonly filed.

A vast resource of information is available online, provided by government and consumer agencies to educate consumers regarding bankruptcy. Bankruptcy records contain a database of consumers who have declared themselves bankrupt. Bankruptcy podcasts are produced by some websites, offering answers to bankruptcy questions sent in by consumers. For help on how to file bankruptcy, a consumer may search the web for such websites or consult a bankruptcy assistance agency.