BANKRUPTCY

INTRODUCTION

Bankruptcy is the legal proceeding which involves an individual or business that is unable to repay outstanding debts. The bankruptcy process begins with a petition filed by the debtor, which is commonest, or on behalf of creditors, which is less common. All of the debtor's assets are measured and evaluated, and the assets are being used to repay a portion of outstanding debt most of the time.

Bankruptcy is a legal proceeding which carried out to allow individuals or businesses, freedom from their debts, while simultaneously providing creditors a chance for repayment.Bankruptcy can allow you a clean start, but it will stay on your record for a number of years depending on the type of bankruptcy one filed.

Filing for bankruptcy is supposed to allow people in serious financial distress some relief and an opportunity to start over, by the time most people get to that point, they’ve already tried many other methods to manage their debt. Bankruptcy certainly has some benefits, potentially allowing you to wipe the slate clean and began a new, but there are lots of things to consider before making any decision, from the negative consequences of filing as to whether bankruptcy would even provide relief for your specific situation.

This is a important decision which requires a significant amount of due diligence before moving forward. While it’s important  to not take bankruptcy lightly, it may be the most effective way for people to induce back on their feet.

So how does one know if bankruptcy is the right way to relieve your debt? this post will discuss further more  regarding a number of  key points to assist you start.

THE BASICS OF FILING FOR BANKRUPTCY AND ELIGIBILITY

Bankruptcy is a legal procedure to discharge debt built up by someone who either won’t be able to repay those debts or does not have the means to repay debts owed currently.

There are three notable types of bankruptcy: Chapter 7, Chapter 13 and Chapter 11.

Chapter 7 Bankruptcy

Traditional bankruptcy is named ‘Chapter 7’ of the Bankruptcy Code. Under Chapter 7, you either pay money for or surrender your properties for secured debts. You also surrender any non-exempt property to pay off the maximum amount. Further, you retain all of your other exempt property and are thus released from any obligation to repay the remaining dischargeable debt.

One important requirement for a Chapter 7 bankruptcy is that you just don’t have any real income to permit you to pay off any portion of your debts.

Chapter 13 Bankruptcy

If you have any kind of possible income that can be termed ‘enough’, you need to file under Chapter 13. In this, you do not need to get rid of all of your debt entirely, but try and do a combination as below:

Consider your income and restructure your payments or get rid of a part of your total debt in a order so that you can manage payments. You can do so by spreading your payments over a longer period of time or by paying only a part of the loan. This way, your monthly/weekly payment amounts will be reduced and you can stretch this system for up to five years. However, do keep in mind that your finances will be under constant supervision of the trustee during this entire time. In a Chapter 13 case, you may spend some time negotiating with creditors as they try to get you to change your plan so they get more money or get it faster. It is preferable to get the creditors on board with your plan, but if they object, it can still be approved as long as the judge deems it fair and if each creditor gets as much as if you had filed under Chapter 7.

Chapter 11 Bankruptcy

An individual or company become a debtor-in-possession if they file for Chapter 11 Bankruptcy. It implies that while they continue to have most of their responsibilities for operating the business, they need to additionally work with the trustee for a plan to reorganize their debts. If both the judge and also the creditors approve, the plan to do so can be put into action.

In most cases, bankruptcy does not protect you from any future debts incurred. It also will have an bearing on your credit score and remains on your credit report for 10 years with Chapter 7 and seven years with Chapter 13. In a Chapter 7 bankruptcy, you may lose assets such as your house or your car depending on how much equity, if you’re able to exempt your equity and if you’re current on your payments.

As stated above, there are commonly two types of bankruptcy for individuals: Chapter 7 and Chapter 13 and there are some significant differences between the two programs. Either one could be more or less beneficial depending on the specifics of your situation. But the very first question is whether or not you qualify for either one, and each has its own set of criteria.

WHEN TO FILE BANKRUPTCY

According to Colwell, filing for bankruptcy needs to be “worth your while,” meaning it should give you relief from your debts to ensure you do not find yourself in a similar situation in the near future, which means that if you got major expenses that you are about to incur, you must wait to file until after you have incurred them so they can be included in the bankruptcy settlement. This is especially important when it comes to filing bankruptcy due to medical bills.

However, with a Chapter 13 bankruptcy, you can seek court approval to incorporate  new debt that you’ve incurred post-filing into your payment plan. In general, though, there are aspects of your financial situation that signal when it’s time to consider bankruptcy. If you can’t pay your bills (and you don’t see that changing anytime soon) and your debt continues to collect, bankruptcy is pehaps worth considering.

Here are some reasons when a person considers for bankruptcy:

1.   Debt collectors are calling- 

You may consider filing for bankruptcy, If you’re behind on your bills to the point that you are hearing from debt collectors. This is especially true if you’re being sued by debt collectors and the amount is so huge that it become impossible to repay. 

2.   You are in danger of losing your home- 

You may consider filing for bankruptcy If you are at risk for losing your house to foreclosure, filing bankruptcy may help you get caught up on your payments and keep your home. With Chapter 13, you are given the chance to keep your home by creating a plan to repay your outstanding debt.

3.   You are using loans to pay your bills- 

You may consider filing bankruptcy if you get into trouble, using short-term high-interest loans such as payday lons. With these loans, people borrow against their next pay check. Title loans are another form of small loan where a vehicle is used as collateral, these loans can create problem for someone already in financial distress.

4.    You are liquidating your retirement assets-

Retirement money is exempt in a bankruptcy, meaning trustees can’t use it to repay lenders. So in most cases, it doesn’t make sense to burn through your retirement money to pay debts thus, in such  circumstances one can consider to file for bankruptcy.

HOW TO FILE BANKRUPTCY IN INDIA

Bankruptcy, also known as insolvency, and mostly governed by two acts in India. The Presidency Towns Insolvency Act, 1909 is applicable in Chennai, Mumbai and Kolkata and the Provincial Insolvency Act, 1920 is applicable in the rest of India.

Under the Provincial Insolvency Act, you can file for bankruptcy if you are unable to repay a debt greater than ?500. The following steps take place thereafter:

Step 1

Firstly, Put your financial records in order. Compile a record of your bills. Also compile a list of your assets and incomes. This income and expenditure financial record will enable you to get the knowledge, exactly what amount you owe in debt. Indian law requires that you disclose all your assets whether you think they have value or not. This financial record will be used in an Indian court during the bankruptcy case. The lawyer will initiate the bankruptcy proceedings.

Step 2

File for bankruptcy individually or jointly. In India, single people can file for bankruptcy alone. Married people should determine whether or not they are in need to file bankruptcy alone or if they should include their spouses. Not including your spouse means that your spouse will be liable to pay any debts you acquired while married.

File a petition under the Provincial Insolvency Act through your lawyer. Under the Act, you will be filing a suit to declare that you are bankrupt. You should not have any assets under your name. In case you are married, your spouse should not have any assets under her name. If you have children, the assets under their names should have been self-acquired. Provision of section 25 of Presidency Town Insolvency Act 1909 protects you from being arrested and detained due to the debts you owe.

Step 3

After filing bankruptcy, the court will decide whether you are bankrupt or not and will pass such order. If you are declared bankrupt, you may get an interim order.

CONCLUSION

Filing for bankruptcy is a big decision, and in the end you are the only one who will know what is right for you and not. Bankruptcy can be not only a long process, but also a very stressful one for those seeking to discharge debts. One must do all the research, evaluate all the options, and then make the decision would most help to reach personal goals. Looking into your options sooner rather than later may help you shore up your financial future and lose less in the long term.