Bankrupt denotes a person’s state in which he or she is unable to repay their debts back to the creditors. The legal procedure which is carried out by the court in declaring a person bankrupt when he or she is unable to repay their payments back is called bankruptcy. This can be done either by a petition by the debtor himself voluntarily or his creditors, involuntarily.
Once a bankruptcy is filed, an automatic stay is issued on the debtor. This means that the debtor cannot burrow further credits from any other creditors. A time period of six months is generally given in between filing the bankruptcy and obtaining discharge. Discharge means the debtor can also appeal for cancellation of bankruptcy. The automatic stay prevents the creditors to collect any debts from the debtor. This stay also states that no property of the debtor can be repossessed without the knowledge of the court, the debtor will be excluded from the taxes and the debtor will be excluded from other litigations, also mortgagers or landlords cannot pursue their activity of payment collection for the debtor.
A month after bankruptcy is filed; a neutral favoring bankruptcy trustee will organize a meeting of all the creditors that the debtor owes money back. The aim of this meeting is to evaluate the property value that the debtor has, to sell those properties to repay the creditors back and to evaluate what properties can be excluded upon the petition of the debtor under “Schedule C”. A bankruptcy paper will be issued to the debtor by the trustee. This procedure prevents the debtor to sell or use any of their property without the permission of the trustee. The three main non – dischargeable debts are criminal fines and debts due to the court, student loans to the government any fraudulent debt that the court finds illegal.
There are bankruptcy laws fall under four major categories, namely Chapter 7, Chapter 11, Chapter 12 and Chapter 13. Chapter 7 is known as “personal bankruptcy”, the most common of all. Chapter 11 is most complex type of all and meant for business specifically. It needs an attorney for the assistance of debtor and more expensive method of all. These two chapters are also called also “involuntary bankruptcy” as petition is filed against the debtor by his creditors. This leaves no other option to the debtor other than selling his properties and paying back his creditors.
Chapter 12 is for family farmers and lets them to repay their debts by giving them more time than all the other categories of bankruptcy. Chapter 13, also called as “reorganization bankruptcy”, enables the debtor to pay back the debts in a stipulated period of time rather than selling their properties and repaying the creditors. To file under Chapter 13, the total debts owed has a certain limits and hence not all can file under this chapter.
Bankruptcy lawyers or legal attorneys perform legal services and take care of the court proceedings. Both the creditors and debtors have legal rights to seek the guidance of bankruptcy lawyers in established law firms. They assist through out the entire process of bankruptcy with their valuable legal opinions and arguments.
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