Commonly Asked Questions About Bankruptcy

Bankruptcy is a state where a person or company may have limited or no means to pay obligations and debts to other people or institutions. There are two kinds of bankruptcy states and these are chapter 7 and chapter 13. There are a lot of questions that people like to ask but are afraid to do so. The following clarifies and explains some of the more commonly asked bankruptcy questions around.

Chapter 7 Bankruptcy

This kind is where a person undergoes a liquidation proceeding. This type of bankruptcy is where the debtor hands control and ownership of non-exempt property to a trustee. The trustee, in turn, will liquidate the different properties into cash and distribute this to those whom the debtor owes credit to. In some cases, creditors are not fully compensated of the debt but some part may be paid. In most cases of this kind of bankruptcy, the debtor is debt free and can start anew with another form of business or life.

Chapter 13 Bankruptcy

This form of bankruptcy is one where reorganization is done in order to accommodate the debts of the person in coordination of his or her predictable income. Cases like these are where the person may have non exempt property which he or she wishes to keep and if their income can cover the debt as well as meet the needs of reasonable expenses.

Questions

Common bankruptcy questions include whether the person spouse or family will be included in the liquidation or the reorganization of income and property. In many cases of debt, the spouse or family of the debtor is excluded from the debt as long as the spouse did not sign any document o contract stating otherwise. Other people also want to know if they are eligible to file for bankruptcy. People who have large medical bills, overextended credit cards and other financial difficulties may apply for bankruptcy. Bankruptcy questions regarding credit standing and whether credit will be granted again are also commonly asked. Credit standing will be restored as soon as the outstanding debts are paid and settled while credit can be granted again depending on which banks to approach. There may be some difficulty in establishing credit for some people but there are no laws saying that those who have filed being bankrupt should not be given credit after clearing or settling their debts.

How to file for bankruptcy may also be included in some questions that debtor want to ask. There is usually a fee that needs to be paid to file for such a state. A lawyer may also be necessary to help you with the necessary paperwork but consultations fees and attendance fees are sure to reach around $1,000 - $2,000. In spite of these new possibilities of debt, one is obligated to hire lawyers for such a proceeding. Laws require the attendance of the lawyers during most of the meetings with creditors to be able to help the debtor and the creditor reach an agreement. Filing for Chapter 7 bankruptcy costs around $300 around the country, there may be some other smaller fees but these are usually minimal.

Individuals who file for bankruptcy may also be allowed to keep certain assets. Each individual state has its own laws and exemptions regarding which assets can be kept by the debtor and not included in the liquidation or reorganization. Usually, some personal property and some tools of the trade which may help the individual gain income are not included in what the state may seize or liquidate. Other benefits which are allotted to the individual in debt by the state as well as his or her income may not also be include din the liquidation and reorganization bid.