Bankruptcy refers to a state where a person of an organization is unable to settle its debts. Filing for bankruptcy is one of the ways that an individual can use to relieve himself/herself from paying debts legally. Although someone gets a chance to a new start it is also crucial to consider the negative consequences associated with this decision.
Before filing for bankruptcy with the courts it is vital to ensure that they have exploited all available channels of dealing with their debts. Some of the alternatives given include getting refinancing to settle debts and consolidation of credit cards if the debt arises from their use.
The first step in filing bankruptcy petition involves signing up with a legal credit counseling organization. Credit counseling helps an individual exploit alternative avenues of getting the debts settled before resorting to file for bankruptcy. There is a test called “the means test” which is undertaken during the counseling sessions to enable a debtor make a decision on the type of bankruptcy to file with the court.
In case all the available avenues are incapable of helping you get out of the debt situation you can move to the next step involving the collection of bankruptcy forms. There are two forms that are obtained from the court. These are the debtor’s bankruptcy petition form and the statement of affairs. Both forms must be filled accurately and to the best of your knowledge.
In filling these forms vital information such as your location the kind of employment that you are in and creditor details need to be explicitly provided. It is essential that you enlist the services of a reputable attorney to guide you in the process although it is not mandatory that you have the lawyer.
When filing the forms the type of bankruptcy that you are filling for also needs to be indicated. The two common types that most people go for are where you have all the debts cancelled to allow one to keep property from potential repossession or foreclosure while continuing you’re your monthly payments. The other type of bankruptcy involves renegotiation of the repayment time.
In this scenario one gets to keep all the assets provided payments are being made toward the repayment of the debts. The lawyer is then responsible for filling bankruptcy petitions on your behalf by submitting the filled forms. Once the petition is filed there will be a summon for a court hearing where parties to the petition such as the debtor and the creditors check the information provided prior to the actual hearing of the case.
In case creditors are available at this meeting they can go ahead and ask questions. Answers to their questions need to be satisfactory and enough to prove that you are unable to repay the debts owed. Creditors also have the option of challenging some of the debts within 60 days from the time the meeting is held.
When hearing of the case is complete the judge will give a period of between four to six months to go through the petition and approve it if necessary. The final hearing is called once a decision has been made by the judge. Depending on the type of bankruptcy filed a decision is made on the type of debts that can be done away with.
A repayment plan is also worked out for those debts that cannot be done away with and this information is provided to both the creditors and the debtor. It is necessary to note that the repayment period is calculated based on the means test that was done during the counseling stage.
Although the judge takes some time to deliver the ruling based on the filled petition creditors are stopped once the filing of the petition is done. Declaration of bankruptcy by the court is usually an opportunity for one to start again. When you follow proper procedures in filing bankruptcy you can protect your property against foreclosure and repossession.
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