It is very important to understand the bankruptcy law completely, as bankruptcy is a legal process that includes a lot of rules. One of the main goals of the Bankruptcy laws is to give an opportunity to debtors to make a fresh start in business. In order to solve debt problems a debtor is able to receive a plan that is developed by the Bankruptcy laws with the help of the separation of his assets among his creditors.
Due to such separation the interests of all creditors will be taken into consideration, i.e. will be measured equally. There are cases when it is possible to stay in business and, moreover, debtors are able to use revenue in order to cover his or her debts. But still an additional aim of bankruptcy law is to give permission to some debtors to exempt them from the financial responsibilities they have amassed after the assets’ division even though their debts have not been paid in full.
It is possible to file bankruptcy many times but it does not mean that every time a debtor will get the same results he wants. For that reason there were made limits concerning debts discharge. Without limits a person could file bankruptcy countless number that could lead to creditors and lenders being out of business. No doubts that credit is necessary for businesses and consumers as good credit is considered to be a good helping hand in times of crisis and at the same time it helps enlarge businesses. When filing bankruptcy a debtor should be well prepared and be sure that he will be able to recover financially after debts discharge.
One should note that there are 2 major types of Bankruptcy proceedings: chapter 7 bankruptcy or a chapter 13 bankruptcy.
Chapter 7 is known as liquidation or straight bankruptcy. An individual, corporation or a partnership can file Chapter 7. In case of Chapter 7 a trustee has to collect and sell all property that is not exempt and distribute the proceeds to creditors. If the debtor is individual, he has rights to claim certain property as exempt. Instead of this, the debtor does not have to pay off all debts but only certain types. As for corporations and partnerships, they do not get discharges. Individual bankruptcies may be required by both the corporation or partnership bankruptcy.
Chapter 13 is considered to be a debt repayment that is designed for individuals or have regular income and at the same time their debts are not less than $1,000,000. Corporations and partnership are not able to file for such type of bankruptcy. According to Chapter 13 individuals can keep their property but instead they have to make repayment from their future income. Each debtor has to make a repayment plan and show it to the court in order to approve it. The stated amount should be paid to the trustee as he distributes the funds for a small fee. After all payments being paid, the debtor receives an exemption of most debts.
Further reading
We obviously try to give you as much information as possible on these pages, but it's impossible to cover everything on a small site like ours. These links are sites we feel are great resources, and suggest you pay them a visit if you're looking for extra information.