Bankruptcy relief is one sure way for a person, or a business, to be able to make a fresh start in their financial affairs. Usually, filing for bankruptcy comes after the individual or company has run into extreme financial difficulties, but once they have filed a new bankrupt claim, they are protected from lawsuits and collection harassments from creditors.
Obtaining legal relief from becoming broke is a vehicle provided for under Federal laws. During the course of the bankruptcy claim form process, the assets and the liabilities of the debtor are assessed. Based on the specific situation of the debtor and the amount of debt owed, the type of it to be filed will be determined. Most individuals end up filing a Chapter 7 or filing Chapter 13 one. In most instances, business entities will reorganize their debts under the structure of a Chapter 11 type.
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There are some very specific rules and regulations when it comes to filing for bankruptcy and which Chapter is applicable. Because of the complexity of this issue, it is recommended that people get help with bankruptcy from an experienced lawyer who can guide them through the process of attaining bankruptcy relief. Obtaining legal relief from becoming broke is a step that is considered drastic and it should not be undertaken lightly.
In many cases, people decide that seeking legal relief is the course they must take after there has been some sort of extreme financial setback or some type of emergency. Many times the root cause of the financial problems comes because of the loss of a job, a business failure, extended illness or injury, divorce or the death of a family member.
When the financial pressures mount to the breaking point, legal relief can become the only option someone is able to exercise in order to find a way to help debts and secure a clean slate. For many years, there was a significant stigma associated with people who ended up filing for it. However, this stigma has faded somewhat in more recent years, as it is seen more in a light of giving people an opportunity to start over again rather than as a failure.
There are two main types of legal relief from becoming broke. The first type, which was the most common until the 2005 bankruptcy reform legislation, is liquidation. Since the new bankrupt reform rules, most of the time only those with a very low income or those who are considered to be less stable debtors are eligible for the liquidation option. The second type of it is reorganization. This type allows for the debts to be structured and paid over a period of time.
Liquidation bankruptcy relief is governed under the mandates of the Chapter 7 type claim form and can be filed by either businesses or by individuals. When filing for brokeness under Chapter 7, the court issues what is called an "automatic stay," which stops all attempts to collect any debts that are included in the court record filing.
A bankruptcy trustee is assigned to the case and is responsible to collect any "nonexempt" property, to liquidate it, and then distribute the proceeds of the liquidation of assets to the creditors. The distribution is done in order of priority which is determined by the bankruptcy statues.
In most cases, reorganization bankruptcy relief is implemented in situations where there is sufficient future income that can be used in a repayment plan. Usually the plan is for repayment of a portion of the full debt and the amount of the repayment is determined by the trustee and based on the debtors ability to pay.
Business and individuals with a great deal of debt, file under Chapter 11 bankruptcy. In most cases, however, individuals who need to reorganize their debts will file Chapter 13 bankruptcy.
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