Claiming Bankruptcy should not be entered into lightly.
Credit counselling is now compulsory under the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act, and must be taken within 180 days of filing bankruptcy.
By having counselling, an individual is made aware of the alternatives to bankruptcy, which may be suitable in their case.
Of the many versions of bankruptcy, chapters 7 and 13 are probably the most well known.
Although it involves the liquidation of almost all personal assets, including your residence if you own it, chapter 7 bankruptcy is often the preferred way to file.
However, after all relevant assets have been liquidated, any outstanding debt (there are exceptions, such as tax), is cancelled, allowing a totally fresh start.
Chapter 13 does not require the liquidation of all personal assets. It works differently in that a repayment plan is put in place to repay all creditors over a 3 to 5 year period.
The changes brought in in the 2005 legislation means that all applicants for chapter 7 bankruptcy have to undergo a means test, to ensure that they genuinely cannot work out a repayment plan.
Given the complexities of filing for bankruptcy, including deciding the best type of bankruptcy to apply for and filling in the initial legal means test, a lawyer is essential.
Also, once a lawyer is acting for you, “automatic stay” comes into effect. This means that creditors can no longer approach you for money. All creditors have to deal through your lawyer.
One of the first things you have to do is supply a list of both debts and personal asets to the court. You will then be recorded answering a series of questions, on oath, at what is called a “Creditors Meeting” where the truth behind your financial submission is verified.
The court decides, in a chapter 7 filing, the assets to be sold and the proceeds distributed amongst your creditors, any remaining debt is then written off and you are no longer liable, resulting in a clean financial slate.
In a chapter 13 case, a repayment plan is made, paying all creditors in full over 3 to 5 years, based on your actual ability to pay according to the means test.
Under chapter 13, the notice of discharge is served 30-60 days after the repayment plan has been completed and fulfilled. Under chapter 7, creditors can legally challenge the discharge on the 60th day after the meeting of Creditors. If no representations are made, notice of discharge is issued a few days later.
If you are thinking about how to claim bankruptcy, I recommend have a look at www.howtoclaimbankruptcy.net for more free information, including advice on how to rebuild your credit score after bankruptcy has been completed. This article, How To Claim Bankruptcy – A Laymans Guide is available for free reprint.
Related posts:
- How To Claim Bankruptcy – Points To Look At
- Consequences Of Chapter 7 Bankruptcy Laws
- Declaring Yourself Bankrupt – How to Go About it
- Chapter 7 Bankruptcy – The Discharge
- A Layman’s guide to Bankruptcy Law
- Chapter 13
- Chapter 13 Bankruptcy
- Means Testing And Chapter 7 Bankruptcy
- Some Facts Regarding Chapter 13 Bankruptcy
- Should You File Bankruptcy Without a Lawyer?
Tags: administration, assets, Bankruptcy, Debt Consolidation, finance, financial management, insolvency, insolvent, Liquidation, money, Personal Bankruptcy, personal debt, personal finance, receivership