Bankruptcy is one of the oldest and longest-running federal protections in the country. The first bankruptcy law was created in the year 1800, and although the process has evolved a lot in the last two centuries, it is still essential for our economy.
Bankruptcy law provides a lifesaver or second chance to individuals and businesses that can not meet their financial obligations. Depending on the type of bankruptcy, you can put debtors on their way to financial freedom by liquidating existing assets or establishing a reasonable payment plan. By doing so, the debtor can gradually cancel part of the debt without suffering additional financial inconvenience.
Difference between chapter 7 and 13 bankruptcy
Chapter 7 and Chapter 13 are the two most common types of bankruptcies in individuals. Chapter 7 deals with bankruptcy and liquidation while chapter 13 deals with the reorganization of a bankruptcy. In other words, Chapter 7 requires the liquidation of some personal non-exempt property, while Chapter 13 allows debtors to keep their assets, but they must pay a quantifiable portion of their debt within 3 to 5 years. Check more information at http://milwaukeebankruptcy.net/.
Chapter 7 bankruptcy is the most common way. Eligibility is usually determined based on income, for which the average state income is used as a reference. Debtors who earn less than the state average are often eligible for the Chapter 7 statement since their limited income may prevent them from complying with the typical payment plan type in Chapter 13. Debtors who earn more than the state average may not be eligible for the Chapter 7 statement, especially if they have the means to meet their financial obligations.
Those who file for bankruptcy under Chapter 7 must provide detailed financial information, such as information about their income, tax returns, outstanding debt records and detailed daily expenses. They should also obtain credit counseling and prove it in court. Therefore, the non-exempt assets of the eligible debtors will be sold and the proceeds of that sale will be distributed among the corresponding creditors. When the process ends, the debtor is released from the debts under Chapter 7 and waives any additional liability he may have for those debts.
The declaration of bankruptcy under Chapter 13 is very similar to the Chapter 7 process. The debtor must obtain credit counseling and provide the courts with detailed financial and debt records, and meet certain eligibility requirements.
According to chapter 13, the debtor must have the required income to make monthly payments, which are usually divided into 3 to 5 years. In addition, Chapter 13 is subject to maximum debt limits that make some debtors illegible.
While payments generally last between 3 and 5 years, most collections are stopped when a bankruptcy is filed under Chapter 13. This includes notices of collection, garnishment of wages, bank liens, and even some foreclosures.
Chapter 11 bankruptcy is the most common form of bankruptcy for businesses. While some individuals may adhere to Chapter 11, most individual debtors do not meet the eligibility requirements. The Chapter 11 bankruptcy gives companies the opportunity to reorganize their debts, usually in an effort to keep the company running. This is one of the most complex forms of bankruptcy, since the company must propose a detailed reorganization plan and negotiate the plan with its creditors. If the parties do not reach an agreement regarding the reorganization plan, they can go bankrupt in Chapter 7 or abandon the case.
The bankruptcy of Chapter 11 offers companies a new beginning, but it can also result, at least partially, in the waiver of ownership of assets before creditors. Entrepreneurs must weigh the costs with the benefits when they consider declaring bankruptcy or not.
Speak Today with a Lawyer Qualified in Bankruptcy
This article aims to be useful and informative. But legal issues can be complicated and stressful. A Lawyer qualified in bankruptcy can attend to his particular legal needs, explain the law and represent him in court. Take the first step now and contact a qualified Lawyer bankrupt near you to discuss your specific legal situation.
Why bankruptcy is important
A robust economy depends on the ability of its citizens to grant credit, secure loans, set up a business and acquire real estate. A person with debts, this is difficult, if not it is completely impossible. The inability of the person to buy a car can have more important social repercussions, so bankruptcy provides a way for the debtor to get back on track and at the same time ensure payment to his creditors.
Determination of when to declare bankruptcy
Bankruptcy is not always the best option to relieve the debtor’s debt. Some debts, such as those linked to child support, student loans and criminal refunds, are considered debts that can not be exempted. This means that they can not be eliminated through bankruptcy. In addition, some creditors are known to prepare negotiable payment plans, which can make filing bankruptcy unnecessary. Each type of bankruptcy has its own eligibility requirements, and potential respondents must determine if they meet those requirements.
In a typical scenario, the debtor will declare bankruptcy after having exhausted all options. In some cases, the debtor will make his statement when faced with possible claims, foreclosures or wage garnishments from a creditor. Bankruptcy can provide certain protections for these activities and effectively stop the collection and delay the recovery process of the assets.