What is Bankruptcy?


Often in a business, there comes a point where a business owner is left with no financial resources to make payments to creditors. The financial obligations cannot meet through total amount of assets he/she has. The assets available are less than the total liabilities. The causes of such a pitiful situation may vary according to circumstances and one of the prime causes is insufficient cash funds. Assume such condition where you need to pay humongous amounts to creditors, they keep on calling you. In such severe situation you are left with one effective option and that is called Bankruptcy. The situation where an individual is unable to make payments of all his debts, even after selling the complete set of assets, is considered as insolvency. There arise the next step and that is to file for bankruptcy. What we notice here that unlike insolvency it’s more than just a financial condition. Often people inappropriately use the two terms interchangeably. It’s a kind of protection offered through law to that individual, who had filed for the same. There are certain privileges offered once you are offered the status of a Bankrupt. For a certain extent you are discharged from all sorts of financial obligations and need not to worry about creditors. Your creditors will not have any right regarding payment of their money. Though filing for Bankruptcy is not that easy and it is only after thorough investigation that court offers you the rights.


How to File Bankruptcy?

Having a glance at the benefits one can avail through Bankruptcy, you certainly would like to know How to File Bankruptcy. Before going any further you first need to make the decision whether you actually wish to file for it. For numerous people it’s not honourable to be considered as a Bankrupt. For those, the situation you are in insolvency, there is no other better option available. Now have a glance what needed to be done to get you declared as a bankrupt.

There are various ways to file for bankruptcy, thus you need to have a thorough understanding. The type of situation has direct impact over the way you have to choose. The basic requirement is to know whether you are eligible to file for bankruptcy. For these cases state courts have no rights and thus, you need to file the application in federal courts. The official website has a number of documents that you can fill online. Though an insolvent is given option to fill the required documents himself but, because of the complexities you are going to face, its better and preferred option to hire an attorney. After that you are required to post US Bankruptcy court voluntary Petition. Filling the document must be done with so much care, since your application can be rejected in case of errors. There is a certain fee to submit along with number of documents. These include details regarding your financial status and means. Yet another reason why most people hire an attorney is because of the language used in Exhibit and Schedule documents, which is completely legal. Understanding such a language to derive the exact meaning is not possible for an ordinary person. The Attorney you hire will offer advice on various occasions, where you simply have no idea what so ever. He/she will take care of rest of the procedure, though you need to provide the information and present at various periods during the whole process.


Bankruptcy Abuse Prevention and Consumer Protection Act

To make some extremely required and important changes in Bankruptcy code of United States Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) was passed on 20 April, 2005. Though, after such alterations it has become more complex procedure for a common man to file for Bankruptcy. See before this act was passed creditors were in severe conditions, where they had no other option than to stay silent. Chapter 7 for filing bankruptcy, under which maximum charges made by creditors are fired, is made thoroughly difficult. And thus, filing for Chapter 13 is more preferred condition for an insolvent, under which he is free from all the charges, only after he makes a part of the payment to creditors. Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) also imposed restrictions when it comes to debtors having various incomes. The exceptions for discharges has been extended, thus it’s a yet another relief for creditors. Gone are the days when filing for bankruptcy was considered an excellent option and people in general used it for unfair benefits. Exempting the house value of debtors on some special cases is one plus point for debtors. There are numerous other changes that have been made through BAPCPA, when it comes to exemptions. Filling for the status of a bankrupt has also been made costlier than before along with the amount of repayment made to creditors.


Bankruptcy Law in the United States

History states number of alterations in due course of time, when it comes to Bankruptcy Law in the United States. Within last 15 years, more than a million of people in United States have file for the status of a bankrupt. There was no such law during 19th century in whole US. Thus, it was difficult for a debtor to get rid of creditors if, did not have sufficient funds. Gradually people started believing; the tendency of strictly punishing an individual was quite unfair and thus demand of Bankruptcy Law in the United States originated. Though there were temporary acts made for the accomplishment of this purpose, it was The Great Depression that made imposed sudden requirements in permanent Bankruptcy Law in the United States. Rights of administration were increased so that the cases could be handled in a better way. It was the Bankruptcy Reform Act of 1978 that brought the final changes in the act.

Being a bankrupt you are offered a number of options and a chance to restart the life and build your credit again.



What is Bankruptcy?