You are facing the possible foreclosure of your house because you failed to repay a loan from a bank. This would mean that you would hand over the ownership documents and have to leave the house. You can throw a hurdle in the proceedings by filing for bankruptcy.
The bank will seek to sell your house and take the money as compensation for the loan that you procured. This is a common problem faced by people today, as they obtained a loan in better times and then the economic condition deteriorated, leaving them high and dry. Obviously, no person wants to be rendered homeless. The option of filing for bankruptcy is available to such people.
There are two ways you can file for bankruptcy, chapter 13 and chapter 7. Chapter 7 Bankruptcy is the more popular choice for people and most of them go for this option rather than chapter 13.
Chapter 7 lays out the process by which the borrower’s assets will be liquidated. The chapter 7 bankruptcy law has separate procedures for individuals and business entities.
The option of filing a chapter 7 bankruptcy is available to individuals who
* Operate a business, or
* Have ownership of a property in the United States of America.
An interim trustee would be assigned to the case who will determine which property of the borrower will be available for liquidation. Under the law, certain exempt property of the borrower can not be liquidated, as well as any liens held by him. Any other property owned by the borrower will be disposed off by the trustee to repay the debts. The individual may receive a discharge from his debts under chapter 7, once the creditors have been paid their dues.
When a business entity is faced with the possibility of failing to repay its debts, it may file for bankruptcy. Under chapter 7, the business would have to discontinue its operations until the trustee gives them permission to carry on.
The trustee liquidates the assets of the entity and pays off the creditors from the money received from sales. This may result in all the employees of the business losing their jobs. Many a time, a whole block or department of an entity is sold off to another entity. This is usually in the case of very large organizations filing for bankruptcy. Unlike individuals, a business entity is not entitled to receive a discharge. Instead, the entity is dissolved and the case is closed.
Once you have decided to file for bankruptcy, what should you do? There are four ways in which a case for bankruptcy can be filed under chapter 7.
There are bankruptcy forms available, both on paper and on the internet. You can choose either one and then fill the form according to your requirements.
Interactive bankruptcy software allows the borrower to gain the knowledge about the data he needs to disclose regarding his assets and liabilities. This method has a few kinks which need to be ironed out.
3. Do-it-Yourself Preparers
Those who can’t afford to pay the charges of attorneys can resort to this method. This is a way to avoid the inconvenience faced when filling out bankruptcy forms.
Bankruptcy attorneys are expensive but they are your best chance of getting through your case successfully. They will provide counsel to you every step of the way.
This was a general overview of the chapter 7 bankruptcy law, which you should know if you want to file for bankruptcy.