Bankruptcy Faqs

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Bankruptcy:

Bankruptcy permits businesses or individuals, who are not able to pay their liabilities, to repay the loan amount over time by working out a plan or to discharge the bills completely.

Difference between Secured and Unsecured debt:

Secure debts are creditor\'s claim insured by a lien in the property of the borrower by the loan agreement or by taxes or court judgment. Creditors claim the property of the borrower in case of bankruptcy. Unsecured debt is not insured by the lien of the property and the creditor is at loss when the borrower is hit by bankruptcy.

Who are eligible to file bankruptcy?

Businesses or individuals having loan amount outstanding with the creditor, with some exceptions, are eligible to file bankruptcy.

How many times a bankruptcy can be filed?

Consumers are allowed to file Chapter 7 bankruptcy once every 8 years from prior filing of Chapter 7 and once every 6 years from previous filing of Chapter 13. They are allowed to file Chapter 13 once every 4 years from previous filing of Chapter 7, and once every 2 years from Chapter 13.

Consequence of Filing a Bankruptcy:

Future applications for credits are not allowed. It has adverse effect on housing rent and job application.

Requirement to begin a Bankruptcy:

A list containing the details of previous and current debts is required. The petition should contain lists of liabilities and assets and a statement showing current financial affairs. The documents with the fees for filing have to be submitted to the bankruptcy court.

Selection of chapter for filing bankruptcy:

Chapter 13 allows repayment to creditors. Chapter 7 allows discharging of the debts. The selection should be done assessing the ongoing circumstances with the available assets for repaying a part or the whole debt. Experienced bankruptcy lawyer should be appointed for bankruptcy related consultation. The borrower eligible for both the chapters can interchange with one simple sentence document.

Consequences of one spouse applying for bankruptcy not the other:

The spouse who has not applied for bankruptcy is accountable for clearing the debts. In case of a divorcee, the ex is accountable for the debts if they are having cosigned on debts of each other. The creditors are allowed to acquire the entire payment of the debt in spite of the divorce decree.

What can one have after filing a bankruptcy?

Assets exempted to an individual are vehicle and home equity up to a certain level, jewelry and equipments essential for the individual to work.

Joint petition:

When individuals with their spouse file a single petition for bankruptcy, then the bankruptcy petition is know as joint petition. Divorcees are prohibited from filing a joint petition.

What is lost after filing a bankruptcy?

Almost everything is lost after filing a bankruptcy but Chapter 13 allows an applicant to have a chance to save his home from debtors, if there are current payments. Post retirement benefits like Social securities or ERISA- qualified accounts are not effect after filing bankruptcy petition.