Bankruptcy – Frequently Asked Questions
Bankruptcy permits businesses or individuals, who are unable to pay off their liabilities, to repay the loan amount over time through working out a plan or to discharge the bills completely.
Difference between Secured and Unsecured debt:
Secure debts are creditor’s claims insured by liens on a borrower’s property through a loan agreement, taxes or court judgment. Creditors claim that the property of a borrower when bankruptcy occurs. Unsecured debt is not usually insured by a property lien and the creditor is at a loss when the borrower is hit by bankruptcy.
Who are eligible to file bankruptcy?
Businesses or individuals that have outstanding loan amounts with their creditors, with some exceptions, are eligible to file bankruptcy.
How many times can a bankruptcy be filed?
Consumers are allowed to file a Chapter 7 bankruptcy once every 8 years from a prior filing of Chapter 7 one and once every 6 years from the previous filing of a Chapter 13 bankruptcy. Borrowers are also allowed to file a Chapter 13 once every 4 years from the previous filing of a Chapter 7, and once every 2 years from a Chapter 13.
The Consequences of Filing a Bankruptcy:
Future applications for credit are not allowed. It also has an adverse effect on housing rent and job application.
The Requirements 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 as well as a statement showing current financial affairs. Documents with filing fees also 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 known 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. However, a 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 Security or ERISA- qualified accounts are not effect after a bankruptcy petition is filed.
How can a bankruptcy petition be reopened?
Bankruptcy cases are reopened by trustees in order to verify any details that were missed during the filing process.
