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Bankruptcy Laws

bankruptcy law

Every time a person hears of bankruptcy they always equate the same to helplessness and financial disarray. However, bankruptcy should not be taken as a negative because financial difficulties happen to the best of us. You should treat bankruptcy as an avenue for you to take a step back and rethink your financial future.

Bankruptcy actually allows individuals, couples, and businesses that cannot meet their financial obligations to be excused from repaying some or all of their debt. This is a form of relief for those who are currently struggling with their finances but want to get back on their feet while making sure that they are able to meet their obligations in the future.

Unlike in other areas of law, like employment and labor law or personal injury law, bankruptcy rules and procedures are governed solely by federal law. Hence, the procedures for filing the same are uniform throughout the U.S.

If you are in financial distress, you should know that there are two types of bankruptcy- Liquidation and Reorganization.

  • a). In a liquidation bankruptcy, debtors must surrender their property, which is sold, and the proceeds distributed to creditors. In return, all debts are permanently discharged, whether the debts are paid in full or not.
  • b). In a reorganization bankruptcy, debtors are allowed to keep their property. But the debtors must agree to an installment plan to repay creditors a portion of the amount they owe.

The foregoing seems easy enough but they are usually not. If you want to file for bankruptcy, this involves submitting a petition and fee to the bankruptcy court. The fee is close to $300.00 for most personal bankruptcies and the petition will contain your sworn statement concerning the amount of money you owe, your current income and expenses, as well as a complete list of all of your assets. After filing the necessary documents in court, a hearing is then held to review the information you presented in the petition.

Chapter 7 Bankruptcy

Chapter 7 bankruptcies cover liquidation bankruptcies in which you must turn over all your “non-exempt” property to a bankruptcy trustee. The law provides that there are property exempt from execution if it falls within specific categories of assets that you are allowed to keep, such as a certain amount of clothing, household items, tools for work, and in some instances, vehicles and the family home. In this case, all your non-exempt assets will be sold and the proceeds will be paid to your creditors. This may result in creditors receiving a small fraction of their claims but be that as it may, bankruptcy provides that all your other unpaid obligations are waived.

Chapter 13 Bankruptcy

If you want to keep your properties, however, Chapter 13 bankruptcy is the way to go. This is also known as the reorganization bankruptcy. This means that if you want to keep your property, you need to file for a reorganization of your debt or a sort of agreement for a structuring whereby you are given a longer time to pay your debt and even renegotiate for the interest and penalties of your debt for you to be able to pay for all your obligations, albeit at a longer time. If you file for Chapter 13 bankruptcy your creditors cannot reject the fact of restructuring. What they can do is negotiate for the terms but providing you with a renegotiated loan is mandated by law.

As you can see, bankruptcy is not actually enacted to doom your financial situation but moreover the same is enacted to make sure that you have an option for a do over of sorts and for you to be able to rethink your financial strategies.

However, bankruptcy is not available to everyone. Those who have had their debts discharged in a Chapter 7 within the past eight years cannot anymore re-file under Chapter 7. For Chapter 13 bankruptcy petitioners, the waiting period is six years before they are able to file for restructuring of their debts again. There are also technicalities if you want to file or be eligible for bankruptcy in the U.S. If you really are in dire financial straits, the best thing to do is seek legal help from expert Bankruptcy lawyers in Los Angeles, California to make sure that you are able to put your family back on track to financial security.

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