Bankruptcy Relief
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When a person or a business has experienced some type of situation which has had devastating consequences in their financial picture, often the only course of action left to them is bankruptcy relief. When filing for bankruptcy, the debtor is able to gain a degree of protection from creditors who may files lawsuits, as well as from collectors and their harassment tactics.
Obtaining legal relief from becoming broke is a vehicle provided for under Federal laws. During the course of the bankruptcy claim form process, the assets and the liabilities of the debtor are assessed. Based on the specific situation of the debtor and the amount of debt owed, the type of it to be filed will be determined. Most individuals end up filing a Chapter 7 or filing Chapter 13 one. In most instances, business entities will reorganize their debts under the structure of a Chapter 11 type.
Since there are some specific, but sometimes subtle, differences in filing for bankruptcy under these different Chapters, it is very beneficial to get help with bankruptcy from a professional, such as a bankruptcy lawyer. It should be noted that bankruptcy relief has rules and restrictions that not everyone will qualify for and it is a drastic measure that should only be considered when all other avenues have been explored.
In many cases, people decide that seeking legal relief is the course they must take after there has been some sort of extreme financial setback or some type of emergency. Many times the root cause of the financial problems comes because of the loss of a job, a business failure, extended illness or injury, divorce or the death of a family member.
When the financial pressures mount to the breaking point, legal relief can become the only option someone is able to exercise in order to find a way to help debts and secure a clean slate. For many years, there was a significant stigma associated with people who ended up filing for bankruptcy. However, this stigma has faded somewhat in more recent years, as it is seen more in a light of giving people an opportunity to start over again rather than as a failure.
There are two main types of legal relief from becoming broke. The first type, which was the most common until the 2005 bankruptcy reform legislation, is liquidation. Since the new bankrupt reform rules, most of the time only those with a very low income or those who are considered to be less stable debtors are eligible for the liquidation option. The second type of it is reorganization. This type allows for the debts to be structured and paid over a period of time.
Liquidation bankruptcy relief is governed under the mandates of the Chapter 7 type claim form and can be filed by either businesses or by individuals. When filing for bankruptcy under Chapter 7, the court issues what is called an "automatic stay," which stops all attempts to collect any debts that are included in the court record filing. A bankruptcy trustee is assigned to the case and is responsible to collect any "nonexempt" property, to liquidate it, and then distribute the proceeds of the liquidation of assets to the creditors. The distribution is done in order of priority which is determined by the bankruptcy statues.
Reorganization bankruptcy relief is usually used in cases where there is ongoing income that will be used in the repayment of the creditors. This repayment may be in full or only a partial repayment and is determined by the trustee and also by the ability of the debtor to make payments over a specified length of time. For businesses seeking to reorganize their debts, or for individuals with a very high debt load, Chapter 11 is the type that would be filed. For most individuals, the reorganization type is Chapter 13 bankruptcy.
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