In today’s picture, it is so effortless to get trapped in debt and bills that prolong to get out of hand. This can happen unplanned for a single individual, a family or even businesses that are getting affected with a wide variety of reasons. And no one can resist such extending financial burdens unless a miracle happens. There arises the situation Chapter 7 Bankruptcy. Bankruptcy is a legal status of an individual who lost the capability to reimburse the debts to creditors. In most jurisdictions, bankruptcy is obligatory by a court order, but often started by the debtor.
Duties of bankruptcy Lawyers:
- To chair meetings with creditors
- To distribute funds to creditors
- To propose for bankrupt’s discharge
- To review the file for any fraudulent preferences or reviewable transactions
- To sell any non-exempt assets
Generally, six types of bankruptcy are classified under the Bankruptcy Code, located at Title 11 of the United States Code. The following are the gists of all types.
- Chapter 7*: It is the simplest and quickest form of bankruptcy. This is the kind of basic liquidation for individuals and businesses and also regarded as straight bankruptcy.
- Chapter 9: Regarded as Municipal bankruptcy, a federal mechanism for the resolution of municipal debts.
- Chapter 11: Known as corporate bankruptcy in which a reorganization used mainly by business debtors, but sometimes by individuals with substantial debts and assets, it is a form of corporate financial reorganization which typically allows companies to continue to function while they follow debt repayment plans
- Chapter 12: This is for family farmers and fishermen.
- Chapter 13: Rehabilitation with a payment plan for individuals with a regular source of income; enables individuals with regular income to develop a plan to repay all or part of their debts; also known as Wage Earner Bankruptcy
- Chapter 15: Ancillary and other international cases and also provides a mechanism for dealing with bankruptcy debtors and helps foreign debtors to clear debts.
*Chapter 7 Bankruptcy:
It is also known as the Liquidation Bankruptcy. The assets of the bankruptcy client will be taken over by a court trustee and cashes them out to make a payment to creditors. The few assets which the client wants to keep away from the case can be stayed away as per the person’s choice. And one should be sure enough to make the payment.
It is called a no asset case, if there are no assets to pay back to the creditors from the bankrupt person. Protection Act of 2005 is essential for the person to file bankruptcy and to take a means test. This test will determine whether the individual consumer debtors qualify for relief under chapter 7 or not. If the income level is in excess of the threshold allowed they might not be able to qualify for the chapter 7. They may have to settle for a chapter 13 bankruptcy.