When an individual, a firm or an entity has accumulated debts which cannot be paid when accrued, legally and economically, their financial state is known as being bankrupt. Indeed, a bankruptcy may be the best alternative if your liabilities exceed your assets and your income is not able to service the debt.
The financial state of bankruptcy in the U.S comes under Federal jurisdiction, which allows for uniformity of laws to deal with these financial situations. However, depending on your State, certain specific exemptions may apply such as homestead exemptions, tenancy by the entirety exemptions, and head of household exemptions.
Bankruptcy occurs usually occurs due to unforeseen economic circumstances, and it is a right Americans have to a fresh start. Indeed, not only does bankruptcy help the individual, it also helps society as a whole by allowing individuals to start fresh and become productive members of society once again.
While it is possible, with diligent paper work, prioritized expenditure and research to carry out the application for bankruptcy, it is always advisable to engage a lawyer specializing in bankruptcy to provide proper counseling and guidance to quickly and efficiently tide over any hurdles and maximize the benefits. A typical bankruptcy costs about $1,600.00, which includes all attorney fees and costs. Commerical bankruptcies, reorganizations or adversarial bankruptcies may cost significantly more. However, most consumers go through a Chapter 7 liquidation which can be fully completed within 3 months time.
Dealing with Bankruptcy
There are many ways by which bankruptcy can be tackled, depending on the magnitude and complexity of the debts in hand. However, it is vital to know which kind of bankruptcy you are eligible to apply for. One may be classified broadly into two types:
Chapter 7: This provision allows you to select, from your assets and property, those which you wish to sell, under the care and guidance of a trustee. This provision is best used for debts which are considered unsecured such as personal loans, credit card dues or non - payment of bills, where no legal agreement has been arrived at over collateral.
This process is generally quick and very flexible. It allows for the individual to quickly overcome the financial burden.
Chapter 13: This provision is useful for paying off debts of a secured nature. The individual is required to gradually pay off their debts while being under a strict expenditure regimen which is monitored and recommended by the bank and the legal advisor.
This provision can be used in conjunction with Chapter 7 under circumstances where the mean income of the individual lies below the state median income to supplement with quick credit to quench the large dues. In Florida, a single individual is presumed to meet the means test if they make less than $40,000.00 per year.
Other provisions such as Chapter 11 and 12 are available for individuals, firms or organizations. Depending upon the nature of their debt, they are seldom used and are usually applied for, with the advice of a specialized attorney. Rising above the debt
It is important to remember that the whole focus for applying bankruptcy is to get a fresh start over your finances. By judiciously curbing expenditure and managing your finances, it is possible to quickly build credit and get overcome the stigma of a bankruptcy.
An individual bankruptcy stays in your credit record for seven years. However, immediately upon achieving a discharge in bankruptcy, your credit score is likely to go up. Bankruptcy rights under Chapter 7 may be exercised every eight years.