Facts About Bankruptcy Declarations

Filing for bankruptcy should not be a cavalier decision as it will affect you and your future in many ways. Before seriously considering bankruptcy you should understand a few things. For one thing, a bankruptcy declaration does not always eliminate all your debts. Also, there are several forms of bankruptcy, but the most common are Chapter 7, Chapter 11, and Chapter 13. The chapter refers to the part of the United States Code governing the various bankruptcy proceedings.Chapter 7 Bankruptcy DeclarationsA Chapter 7 Bankruptcy is also known as a liquidation. Under the proceedings outlined for Chapter 7 Bankruptcy, all valuable property owned by the debtor must be turned over to a court trustee. Once deeds, titles, and proof of ownership are turned over to the court, the trustee sells, or liquidates, them and distributes the proceeds among the creditors according to the percentage of income each was owed before the declaration.Also, creditors addressed by a Chapter 7 Bankruptcy must deal with the court trustee to settle all payments. After the liquidation the creditors may not seek any more restitution form the debtor. The debtor is legally released from any further obligations towards those creditors. A Chapter 7 Bankruptcy can only be filed once every seven years.Chapter 11 Bankruptcy DeclarationsA Chapter 11 Bankruptcy is usually employed for corporate declarations of bankruptcy. Some individuals may file for this sort of bankruptcy if they are self-employed or own a business. Chapter 11 Bankruptcy is designed to allow businesses or the self-employed to continue working while restructuring all debts under the supervision of a court-appointed trustee.The is the type of bankruptcy most generally talked about in news reports when a large company files for bankruptcy, but then emerges seemingly unscathed by the proceedings.Chapter 13 Bankruptcy DeclarationsIn this type of bankruptcy, creditors are recompensed through the future earnings of a debtor. No assets are seized and liquidated. The debtor gets to keep most, or even all, of any valuable assets. The court appoints a trustee who works with the court, the creditors, and the debtor to work out repayment amounts and schedules.Over the life of this plan, which can range up to five years, the debtor is not allowed to take on any other debt. The debtor must also consult the trustee for permission to sell any assets. If any payments are missed according to the court supervised plan to which all parties are signers, the Chapter 13 Bankruptcy can be converted to a Chapter 7 Bankruptcy at the request of any creditor.Bankruptcy Is Not an Escape from FraudMost people are surprised to learn that a declaration of bankruptcy does not on the face of it discharge all debt, not even in the so-called liquidation bankruptcy (Chapter 7). If a lender or creditor can prove that a debt was incurred by fraud, or was taken on by the debtor with no intention of repaying, that debt may be exempted from the bankruptcy. So, a debtor should not buy a fancy car on Tuesday and declare bankruptcy on Wednesday.A debtor should weigh heavy on considering a bankruptcy. It is a life-changing circumstance that will affect the future personal and financial existence of anyone who makes such a declaration.