Bankruptcy is an interesting topic of discussion, but it isn’t a good situation to be in. It’s quite interesting to learn bankruptcy definition, description, and its types. These will be discussed further. However, to know more about bankruptcy in detail, log on to https://www.recoverylawgroup.com/bankruptcy/ now.
Any individual or an entity if not able to honor its financial obligations due to various reasons can file for bankruptcy. The individual or the organization should have the intent but no resources to pay off the debt or the financial obligations to file for bankruptcy. If an individual has resources and no intent to pay off the debt it can be referred to as fraud or malpractice and even bankruptcy can’t protect such an organization or an individual.
Once bankruptcy is declared, the bankruptcy court depending on the type of bankruptcy filed liquidates the assets to clear some or all debts of the filer or approves a payment plan proposed by the filer to accommodate maximum debt through monthly installments over the next few years.
In terms of description, bankruptcy is a legal procedure or an action that is undertaken by the debtor as a last resort to prevent harassment of the lenders to start afresh using the bankruptcy laws. Under the bankruptcy laws, the debts which cannot be recouped are considered discharged or settled and once the process is complete, the bankruptcy filer will not be liable for the discharged debt.
Filing for bankruptcy is often considered as a last resort predominantly due to the many impacts it can have on the filer post the process is complete. Being listed in the bankruptcy list that is accessible to the world is certainly not a great achievement. It might be a sense of humiliation, but it is still better than lender’s harassment and foreclosure threats. The second major threat is the impact on credit scores. A lower credit score means an inability to get big-ticket loans in the future and an inability to get collateral-free loans as well.
Bankruptcy filers have different options to file for bankruptcy. The options are called chapters and the most used ones are 7,11, and 13. Chapters 11 and 13 have similar characteristics of having a payment plan proposal for 3-5 years in the future to accommodate as much debt as possible. These chapters help in safeguarding assets and discharging debts that cannot be accommodated in a fair payment plan over the next 3-5 years as well. Chapter 11 is focused on businesses and individuals who have higher debts, while chapter 13 is exclusively for individuals and is a low-cost option, especially for individuals with debts lower than a particular ceiling.
Chapter 7 on the other hand is the chapter that is accessible for both businesses and individuals and is all about winding up or liquidating. In the chapter, the non-exempt assets are liquidated by the bankruptcy trustee under the bankruptcy court supervision to settle as many debts as possible. In this scenario, the businesses wind up and the individuals lose all assets which are non-essential or can be classified as luxurious.
Intriguing bankruptcy and its chapters can be too much to handle while undergoing financial trauma and stress. Hence, a good attorney can save your day. Dial 888-297-6203 to connect with the most qualified and established attorneys in Los Angeles & Dallas, TX.