What is bankruptcy and how does it work? • Legal Scoops
There is no way to approach the topic of personal bankruptcy without first addressing the basics. If you are considering bankruptcy as a solution to your financial problems, it can be helpful to understand what it involves and how it works. Bankruptcy is the process of paying off your debts under Chapter 7 or Chapter 13 of the US Bankruptcy Code, but not all debts qualify for relief under these chapters. The following sections explain the basics of bankruptcy to know what it is and how it works.
Most people cringe at the mere mention of bankruptcy, and it can be a scary concept. However, debt relief under Chapter 7 or Chapter 13 of the US Bankruptcy Code is one way to get protection from paying your debts in full. This is an option of last resort, but it can help get you back on track.
Chapter 7 Bankruptcy
If you deposit for Chapter 7 Bankruptcy protection, you surrender most of your assets to creditors. However, you must also prove that you cannot pay your bills and that your creditors are unlikely to be reimbursed in full. This can be difficult to prove, so most people seeking bankruptcy protection use Chapter 13 bankruptcy instead.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy is often preferable to Chapter 7 because you don’t have to give your assets to creditors, but you do have to pay at least some of your bills. Under Chapter 13 bankruptcy, the court will create a plan to pay off your debts over the next three to five years. After that, the court will determine how much you can afford to pay and whether creditors should receive all or none of what you owe.
who declares bankruptcy
So you got a notice from the bank that your house was foreclosed, and now you’re wondering who filed for bankruptcy. There’s a lot of confusion around this question, but it’s not as confusing as it seems. If a bank repossesses your home because you haven’t repaid your mortgage payments, this action is called a “power of sale” foreclosure. A foreclosure with power of sale is different from a court foreclosure because, in a court foreclosure, the bank must go through the legal process to foreclose on your home. With power of sale, the bank can follow its pre-established guidelines and seize immediately.
However, with a power of sale, the bank must still file a notice of default with the court. Before reacting to this advice, you should know that some owners go through a voluntary bankruptcy procedure. So before you jump to the conclusion that you can’t expect free legal representation if your home is seized by a power of foreclosure, remember that there are other ways out of this situation. If a person declares bankruptcy, they officially declare bankruptcy. If you were to go to court and declare bankruptcy yourself, you would be considered the “petitioner” in the proceedings. The applicant cannot file for bankruptcy on their behalf, but they can always choose to authorize someone else to do so on their behalf. In these procedures, a person who declares bankruptcy is called a âdebtorâ.
When should I declare bankruptcy?
There are many professions that cater to people living in America. One of them is the field of law, where lawyers fight for their clients, usually in criminal and civil cases. In these situations, lawyers are remunerated. But some people cannot afford a lawyer.
So what are they doing? In these cases, they declare bankruptcy to fulfill (pay their debts) these obligations. Bankruptcy can be a lifesaver for some people, but it’s not something anyone should take lightly. Although it’s rarely the best choice for people in financial difficulty (and there are times when bankruptcy may not be appropriate even if debts don’t need to be discharged), everyone should know how to file for bankruptcy. Here’s why:
- It’s usually not the best option for people with big debts, but it’s always good to know what to do. Spotting financial problems early on can save you thousands of dollars. Unfortunately, many people don’t know what to do when they run into a problem and file for bankruptcy. The first step is to talk to a knowledgeable advisor like an experienced attorney, CPA, or escrow agent.
- It is never too late for a bankruptcy discharge. Bankruptcy may not be the best idea for people in debt, but it’s a good option, especially if you’re having trouble paying off your loans or credit card bills.
- Not all bankruptcy petitions are accepted for filing and only some of the debts are discharged. It is important to understand that not all debts can be discharged through bankruptcy. The debtor must prove to the court that he has a good reason for filing the petition, and if he cannot pay his bills at that time, these obligations may not be discharged by the court.
Consequences of bankruptcy
Remember that old adage, “you can’t get something for nothing?” The same applies in the event of bankruptcy. Once you have declared bankruptcy and it has been discharged, your creditors will still be able to sue you for the unpaid debts they claim are owed. However, if a creditor comes after you before the discharge has taken place, there is a risk that this will trigger a reaffirmation agreement. This means that the creditor takes charge of collecting the debts on the account and only asks for payment of these debts without harassing you or contacting you again about it.
There are a few things you can do to avoid this. First, don’t act like you have a lot of money in front of the creditor; they may be able to use your statement against you later. It is best to act as if you have financial problems. Second, don’t do anything that could be construed as reaffirming a debt. This includes allowing credit card companies to increase your credit limit or to continue using a credit card after you go bankrupt.
Legal Scoops editor Jacob Maslow founded several online journals, including Daily Forex Report and Conservative Free Press.