The concept of bankruptcy has its roots all the way back to the Old Testament. When an individual becomes insolvent to the extreme of no longer being able to meet financial obligations, bankruptcy provides the necessary relief and means to getting ones life and finances in order.
It should be noted that a bankruptcy discharge can negatively impact your credit rating for seven years and in some cases, up to ten years.
In American law, bankruptcy is covered under the Code of Federal Regulations chapters 7, 9,11,12,13 and 15. The majority of bankruptcy filings are filed under chapters 7, 11 and 13. The federal courts, by law, have exclusive jurisdiction over bankruptcy proceedings as cases cannot be brought in a state level court.
Filing bankruptcy under chapter 7 means that the individual must liquidate all assets except assets that are exempted by federal rule and use the proceeds to pay off all creditors that can be paid. The obligations that can’t are discharged and the obligation no longer exists.
Chapter 11 bankruptcies are typically pursued if the individual or corporation filing seeks to reorganize the business while remaining in possession of the property or assets held. Chapter 11 is the route an individual may opt to file under if he is a sole proprietor as there is no legal distinction between a sole proprietor’s business assets and the individual’s assets; they will be treated as the same.
Chapter 13 is referred to as “the wage earners plan”. Filing under this chapter allows regular wage earners the opportunity to develop a repayment plan in conjunction with the individuals’ creditors over a 3 to 5 year period. No assets are liquidated and no debts are discharged however, creditors will be unable to initiate or continue collection efforts during the repayment period.
Under most circumstances, an individual or company will only be permitted to file for bankruptcy once every seven years. It is often permitted to convert to a different chapter during a proceeding. An example would be an individual who files under chapter 13 then circumstances arise that prevent repayment and the proceeding would then convert to chapter 7.
While it is possible to file and conduct a bankruptcy proceeding without counsel, the assistance of an experienced bankruptcy attorney can be invaluable if a problem with your case arises or if one of the creditors decides to contest the bankruptcy proceeding as there are numerous rules and procedures that an individual may not be adequately prepared to deal with on his own.
Refrences:
"Experian" http://www.experian.com/disputes/faq.html
Eric Johnston - null
