Bankruptcy faq
Bankruptcy is a federal court process which helps consumers and business in eliminating their debt or repaying them under the protection of the bankruptcy court. This definition clearly points towards two different varieties of bankruptcy faq processes one that leads to liquidation and another that leads to reorganization.
Let us briefly look at the liquidation variety of bankruptcy. Here the property of the person filing for bankruptcy is sold i.e. liquidated so as to pay off as much of his/her debt as possible. Of course, the person is still left with enough property to try and make a fresh start. This type of bankruptcy is referred to as Chapter 7 bankruptcy.
Now let us look at the reorganization variety of bankruptcy. In the reorganization route, the bankruptcy court approves a reorganized repayment plan which you submit to the court. This plan gives you an extended time period, usually three to five years, in which to repay your debts, either fully or partly(in case full repayment is not feasible). This is called Chapter 13 bankruptcy.
Here, the Chapter refers to the chapter of the federal statutes (Bankruptcy Code) containing the bankruptcy law.
Let us now study Chapter 7 bankruptcy in greater detail.
As already discussed, Chapter 7 i.e. liquidation bankruptcy will wipe out your debts, but to achieve this, the bankruptcy faq court will sell off i.e. liquidate some of your property to pay off your creditors. Chapter 7 bankruptcy usually takes the least time to complete. The process is over in about four to six months and costs $299 in filing and administrative fees, commonly requiring only one trip to the courthouse by the person filing for bankruptcy.
Who can file for Chapter 7 bankruptcy
Chapter 7 bankruptcy may resemble a nice remedy for debt problems, but you will have to find out whether this remedy is available to you or not. If the bankruptcy court finds that you have already received a bankruptcy discharge during the last few years (the exact time period considered by court will depend on the type of bankruptcy discharge you received) or a detailed analysis of your income, expenses and debts suggest that you can complete a Chapter 13 repayment plan, the court may declare you ineligible to file for Chapter 7.
Chapter 7 bankruptcy process.
There is a two page petition and a number of other forms to be filled up and then filed with the bankruptcy faq court in your area. These forms will require you to mention in detail about your property, your current income and sources of income, your current monthly living expenses and your debt obligations. A certificate that you have received credit counseling from a credit counseling agency approved by United States Trustees Office also needs to be filed.
The first effect of filing for bankruptcy is that it provides you an order for relief, also known as an automatic stay. This automatic stay will stop most creditors from trying to collect from you what you owe them. So you get the much-needed breathing space since now creditors cannot legally grab your wages or try to empty your bank account or try to snatch away your car, house or other property.
Technically, by filing for bankruptcy, your property and the debt you owe is now placed in the hands of the bankruptcy court. Now as long as the process is on-going, you cannot sell or give away any of your property without the courts consent. There can be a few exceptions to this general rule. You may be able to do as you please with the property you acquire or any income that you earn after filing for bankruptcy.
To take this process to its logical conclusion, the bankruptcy faq court will now appoint a person called the bankruptcy trustee whose primary duty is to see that your creditors are paid as much as possible. To make sure that bankruptcy trustee works whole-heartedly towards this goal, trustees payment is kept directly proportional to the volume of assets the trustee recovers for the creditors. The trustee will check your papers to see if they are complete and in order and also to find out which are your non-exempt properties so that they can be sold to pay the creditors. However, in a majority of Chapter 7 cases, there is very little that a trustee finds of value to sell.
Calling a creditors meeting.
All the creditors that you have listed in your bankruptcy papers are given a notice informing them that a creditors meeting has been scheduled on a particular date and time. The trustee will run this meeting and may ask you questions about your properties, compulsions for filing for bankruptcy and supplied by you in your papers. Its very rare to find creditors attending this meeting but in your case, if the creditors do attend, they can question you under oath about your collateral and questions related to information you gave them to get the loan.
However, reality is that hardly any creditor attends this meeting and generally this meeting folds up within a few minutes. In most Chapter 7 cases, this happens to be the only time the debtor is required to visit the courthouse as this meeting takes place in the courthouse premises. After the creditors meeting, if the trustee reaches the conclusion that you do have non-exempt property, you will either have to surrender that property or pay the trustee its value in cash. However, if the trustee feels that the non-exempt property is not worth very much or that it will not be worth the effort to sell it, trustee may abandon the property, in which case, even though the property is non-exempt, you will get to keep it.
In real life, what usually happens is that most of the property owned by a Chapter 7 debtor either turns out to be exempt or is judged as quite worthless as far as raising money for creditors is concerned. So, unless your property is a collateral for a secured debt, such as your house or car, you may be required to surrender very little or nothing at all. However, if your property is a collateral for a secured debt, then the picture changes. The most common example of such collateral is car or house. If you are unable to repay these secured debts, the creditor can get the automatic stay lifted and can repossess or foreclose on the property
Thus, at the end of this Chapter 7 bankruptcy process, all your debts will be wiped out except those debts that automatically survive bankruptcy. Example of such debt includes child support, tax debts and student loans.
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