Bankruptcy Procedure
Have you ever take loans and are unable to repay back the amount now. Is that amount just rising and piling up such that can be never cleared. Then you might be surely thinking of Bankruptcy. But before moving further let us make ourselves clear that bankruptcy is not the only option or rather solution to get rid of debt there are many other ways. In simple terms Bankruptcy can be defined as a legal, complicated and a very lengthy process, by which anyone or any business that ends up in financial trouble could resort to in order to get rid of their debts and to get them paid under the protection of the court. When you file for bankruptcy the terms that are often used are Liquidations or Reorganizations. The two kinds of bankruptcy are Chapter 7 and Chapter 13.
Bankruptcy Law:
Remember, the landscape has changed with the introduction of the new bankruptcy law. Therefore let us brief you. Before filing a bankruptcy case you will have to get credit counseling, and before your debts can be wiped out, you will have to get counseling on budgeting and debt management. Those having high incomes will not be allowed to use Chapter 7, but under Chapter 13, they will have to repay some of their debts. And, since the law imposes additional requirements on lawyers, it will be tough for you to find an attorney. Their charges too will be high because they will have to spend more time on bankruptcy cases. Counseling Requirements
First of all, before filing for bankruptcy, you must complete the credit counseling with an agency approved by the United States Trustees office. You will find one, if you go to the Trustees website, www.usdoj.gov/ust; and click on Credit Counseling and Debtor Education. You need this counseling because you should know if you really need to file for bankruptcy, or if an informal repayment plan is okay to get you back on your economic feet, or if you are facing debts that you find unfair, and dont want to pay. If the agency comes up with a repayment plan, then you will have to submit it to the court along with a certificate showing that you have completed the counseling. It is only after this, that you can file for bankruptcy. Once the bankruptcy case is over, then, you have to attend another counseling session. In this session you get to learn about the personal financial management. Once you fulfill this requirement and submit the proof to the court you will get bankruptcy discharge, wiping out all your debts. For a list of approved debt counselors, you can go to the above mentioned website.
How High is Your Income:
Under the new rules, the first step is to measure your current monthly income against the median income for a family of your size in your state. The current monthly income is the average income of the last six months before the bankruptcy case is filed. You can compare your income to the median income for your state by going to the website of the United States Trustee, www.usdoj.gov/ust; and clicking on Means Testing Information. If your income is less or equal to the median, you can file for Chapter 7, but if your income is more, then you must pass the means test. Means test is a test held to find out if, after deducting your expenses, your disposable income is sufficient or not to make your payments on a Chapter 13 plan.
To know if you pass this means test, you calculate your current monthly income and minus the following from that amount :
1. The IRS has imposed limits on Certain Allowed Expenses, which are lower than your cost of living, because you cannot minus what you actually spend for things like food, clothing and travel.
2. You will have to make Monthly Payments on Secured and Priority dents. In Secured debts, the creditor can seize the property, which is mortgaged, if you dont pay, and in Priority Debts, which includes child support, wages to employees, tax, and alimony; since these debts are obligations, they are entitled to jump to the head of the repayment line.
If your monthly disposable income, after you minus these amounts, is less than $100, then you have passed the means test and can file for Chapter 7, but, if it is more than $166.66 then you have failed the test. But, if it is between $100 and $166.66 then if the balance amount is enough to pay more than 25% of your debts over a period of five years, then you flunk the test, if not, you pass the means test.
What is Chapter 7 Bankruptcy OR What is the ultimate aim of filing for Bankruptcy? There is an added advantage with Chapter 7 bankruptcy. If you sign a reaffirmation agreement, then you can continue to pay for a car loan or a mortgage of your home. This is so, because according to the US Government Bankruptcy Code, a debtor is allowed to retain some or all of his property. It gives the debtor a ceiling of five years within which all the creditors must be paid their money. This entire process is carried out under the supervision of the courts.
How Do I File For A Chapter 7 Bankruptcy?
First, be sure if you really need to file for bankruptcy. For that, you have to fill the evaluation form and then meet the attorneys to discuss your case. Give all the information needed correctly and completely and then leave it to them to do the needful.
Bankruptcy Procedure:
All of you who are faced with the fact that your debts are rising to such an extent that you may have to file for bankruptcy, but have no clue of how to go about doing so then do not worry because we are here to help you in our own way. We do not claim that we are 100% correct nor do we claim that we know all the legal proceedings, but we do have more that enough knowledge that can surely be of help to you.
The most important step is to put your bankrupt status on paper and you can do this by filing for bankruptcy through the bankruptcy court.
You need to keep in mind that this entire procedure is a legal one , hence each decision you make should be well planned in advance i.e.,
Whether you want to take up this procedure on your own.
You want to take professional help of a legal advisor.
It is possible that you file for bankruptcy on your own, but let us make it clear that it is a very lengthy procedure and requires a lot of patience and diligence. If you plan to file for bankruptcy on your own you first have to decide which type of bankruptcy are you going to file for; Chapter 7 or Chapter 13
Deciding on which type of bankruptcy to file for is not as simple as it sounds, apart from the information we have given we would advise you to talk to a few people who might know more technical information about filing for bankruptcy.
A yet safer option is to get in touch with a bankruptcy lawyer who can guide you through the complex procedure.
In order to file your voluntary petition and compile your personal information you will have to provide the lawyer with all your personal information accurately.
Once the documents are completed and filed at the court, a trustee who will look into the matter to see to it that all the information that needs to be collected from you, and all that is provided is accurate or not, will be assigned to you.
Meeting creditors, their lawyers and all those who are involved in this case are the procedures that follow later.
Your estate is then transferred to the trustee who will release it (sell it off) in order to distribute the funds to the creditors.(If you cannot buy back your assets with the help of third party funds then you will lose them)
The term of bankruptcy is for 1-3 years, any asset acquired at that time can be seized by the trustee. The assets can include- inheritance, fund maturity, pension, property, equity or insurance payout.
During bankruptcy you cannot manage, promote or start a business. Neither can you act as a director. You cannot even borrow 250 pounds without disclosing its status.
You having failed to comply with a Bankruptcy Notice is a very common act of bankruptcy that is relied on. This requires that the creditors debt be paid within 21 days. The creditor issues the Bankruptcy Notice on you within 6 months of issue. This time may be extended by the Official Receiver (ITSA) (Insolvence and Trustee Service of Australia). A creditor can apply for substituted service to the court. If you want to challenge the notice then it has to be made to the court.
A creditor may apply to the court for a Creditors Petition to be issued if you do not comply with a Bankruptcy Notice within 21 days of service and the notice has not yet been set aside. Details of the forms and fees for such an application can be obtained from a registry of the federal court or the federal magistrates court. During the course of proceedings, you are served with certain documents. At the same time the creditors have to file affidavits with the court to establish service relevant to their petition. If the court feels that the procedure followed is correct and satisfying then it will declare that you should be termed as a Bankrupt . The court will make a Sequestration Order against you. This order is an order that makes a person or many people Bankrupt.
The (National Personal Insolvency Index) NPII that is maintained by the ITSA, has to be searched by the creditors just one day before the date of hearing for the Sequestration Order. This has to be done in order to know whether you are involved in any other personal proceedings. During this process a number of documents are lodged with the ITSA.
Conclusion:
Bankruptcy is a complex process. If you want to make a person bankrupt or if you want to file for bankruptcy or if you wish to defend an action by a creditor, then you should not only be relying upon this information. You should be seeking legal advice from your own independent legal advisor.
Since filing for bankruptcy is an opportunity for you to get out of a financial crisis and start afresh, then Chapter 7 Bankruptcy is the way to achieve this faster. This is because all the non-exempted property of the debtor is sold and the money is distributed to the creditors. But, in most cases, you have no assets to lose, therefore the fresh start takes place faster.
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