When Someone Declares Bankruptcy
When someone declares bankruptcy, there are many mischaracterizations about bankruptcy. There is an approach by allowing an individual to get a fresh start. Many people believe it is shameful to file for bankruptcy. The Soubra Law Firm does not believe that. What this law firm believes that this is an ignorant way viewing bankruptcy. There is nothing wrong with someone having a fresh start which is the whole purpose for filing for bankruptcy. Congress enacted the bankruptcy law for those who are burden with debt to provide them with a fresh start. The burden it removes from the debtor’s shoulder when he/she is relieved from not worrying about bills anymore. The debtors are protected by the bankruptcy law where it is a useful tool to restart your financial status, and it is there if you need it.How Does a Bankruptcy Work for You?
To begin, there are four types of bankruptcy available to the public if a person or business cannot pay the debts which are the following:
- Chapter 7 bankruptcy;
- personal Chapter 13 bankruptcy;
- personal Chapter 11 bankruptcy; or
- a business Chapter 11 bankruptcy.
In items 2-4, debtors wish to restructure their debt and develop a payment plan. Chapter 7 personal is a type of bankruptcy where debtor can eliminate certain types of debt. Business Chapter 7 bankruptcy is an orderly liquidation of a business. To use a personal Chapter 13 bankruptcy to become caught up with late payments on a mortgage which is a way to restructure the mortgage arrears within 3-5 years. For instance, a business Chapter 7 bankruptcy permits the trustee to take assets from the business to sell them and then to use the proceeds to pay the creditors where the court is used to make sure that the creditors are paid according to the priority of debt. In the bankruptcy process, the debtor can earn good income and own substantial amount of property.
There are three stages that take place in a bankruptcy process which are an automatic stay, discharging most debts, and prioritizing of debts. The common players who are involved in your bankruptcy process such as you the debtor, trustee, U.S. Trustee, and creditors.Filing of Bankruptcy
The debtor would have to file a bankruptcy petition that shows the bankruptcy court, creditor, and trustee what is the debtor’s financial position. When the bankruptcy petition is filed, there is an automatic stay which immediately stops all collections until the court rules that the debts are discharged. That is why it is very critical that you file the bankruptcy petition immediately. The bankruptcy petition should have all of the debtor’s property listed, a list of executory contracts, lists of all creditors, unexpired leases, debtor’s monthly income and expenses. In the bankruptcy petition, there is a Statement of Financial Affairs which requests a number of detailed financial information. Depending on the nature of the bankruptcy, there are other schedules and forms that a bankruptcy should include.Estate in Bankruptcy
When the bankruptcy is filed by the debtor, the bankruptcy estate is the property of the debtor. There are rules about transfer the property to another person during this time period. The debtor does not own any property. After the discharge, the property is vested back to the debtor in a Chapter 7 and in Chapter 13 when the plan is complete or dismissal.In a Bankruptcy Petition, What Debts are Included?
All debts incurred by the debtor. The debtor must list all debts with no exception. In many instances, the debtor can have their car, home, and other assets.How Does the Automatic Stay Works?
Normally, the automatic stay occurs when the bankruptcy petition is filed. This ceases all collections such as foreclosures, wage garnishments, bank account garnishment, and provides the debtor to relax from making payment to his creditors.Chapter 13 When Prioritizing of Debt
Certain debts get paid first rather than other debts.Debts Being Discharged
Lastly, the debtor is seeking a discharged from his debts. This is the purpose as to why the debtor filed for bankruptcy. In a Chapter 7 who no asset case, the debts are normally discharged within 60 days after the creditors meeting. The debts that are being discharged are credit cards, personal loan, and injunctions of collecting payment for the debts. For a Chapter 13, the debts are discharged when the payment plan is complete. For a Chapter 11, the debts are discharged on confirmation of a plan.
Should you have any questions or concerns about bankruptcy, please call the Soubra Law Firm at (301)219-5038 to discuss your bankruptcy issue.