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Posts made in February, 2014

A Brand New Financial Start through Chapter 7 Bankruptcy Law

Posted by on Feb 6, 2014 in Bankruptcy Laws | 0 comments

Searching for legal means to pay overwhelming debts may be a hopeless endeavor for those who are not totally aware of the existence of the bankruptcy law – the law that allows legal declaration of inability to further pay individual or business debts that have risen to an unmanageable amount. Bankruptcy is one of the best and legal solutions individuals and businesses have as the law will not only help them gain control over their finances again, it will also immediately stop any form of harassment employed by creditors or law firms (such as e-mails, phone calls, letters, text messages and lawsuits) to force debtors to pay.

Many individuals who find themselves in crushing debts make the wise decision of seeking legal counsel (business firms usually have their own lawyers to guide them through this concern). Your lawyer will first asses your financial situation and then will go on to explain to you the legal options you have to enable you to have a brand new financial start. But make sure you choose a really good bankruptcy lawyer as not all lawyers have equal expertise and exposure to bankruptcy laws and proceedings.

If you own a business, your lawyer may advise you to file for business bankruptcy that is either supported by Chapter 7 or Chapter 11 bankruptcy law. Chapter 7 bankruptcy, in particular, is a liquidation bankruptcy process. This is applicable to those who own properties, but whose income or salary falls with the chapter’s stipulated limit. This type of bankruptcy will require the liquidation of some of your properties, thus its definition. Your properties will be sold by a trustee, who is appointed by the court, and the amount earned will be distributed by this same trustee to your creditors in payment of your debts (debtor have the option to choose which among his/her properties would be exempt from being liquidated).

Debts are classified as either dischargeable or non-dischargeable. Dischargeable debts, which include personal or business loans, medical bills and debts resulting from credit card use, are those that the court may release you from (you need not pay); non-dischargeable debts are usually related to governmental bodies, like alimony, court fines and student loans (home mortgages may sometimes be included).

To be able to qualify for Chapter 7 bankruptcy, applicants will have to go through a means test. This test will determine, through your income, if you can seek protection from your debts using this bankruptcy law. Business firms, on the other hand, that choose to file Chapter 7 bankruptcy will be required to stop business operations, unless allowed by the appointed trustee to continue. This is because the company’s assets will need to be sold to pay (in this particular hierarchy) investors, unsecured creditors and secured creditors (a system of hierarchical payment called “absolute priority”).

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