Bankruptcy Filing: Key Points

The main reason for filing bankruptcy by a person who is hopelessly over burdened with debt is to wipe it out and creating an opportunity for the debtor to start afresh.  Bankruptcy is a declaration made legally by a person or a business organization, accepting their inability to pay the debts to their lenders or creditors.  There are two methods by which a person can file for bankruptcy.  Either the debtor himself files a petition and volunteer for bankruptcy or when a creditor asks the court to issue notice to deem a borrower bankrupt.  In both the cases a trustee is needed to administer the bankruptcy.

Two types of bankruptcy filing:

One kind of bankruptcy filing is done the straight way and the other being the reorganization bankruptcy, also known as chapter 7 and chapter 13 bankruptcy respectively.

In the straight way of filing bankruptcy is by liquidating all the non-exempt property which is handed over to the bankruptcy trustee.  The cash got from the liquidation process is then distributed to all the creditors which relieve the borrower of his debts.  The debts are cleared in four months time period on an average scale.

In the reorganized way of bankruptcy or the chapter 13 bankruptcy filing is meant for debtors who would like to pay off their debts within a period of 3 -5 years time.  Also it enables the debtor to keep their non exempt property if they wish to.  Also it is meant for steady income people who have enough money to pay their debts off.

It is not mandatory to file bankruptcy by hiring a lawyer, but is advisable due to the complexity of the bankruptcy laws.  It is an advantage to hire a lawyer as he can explore all the options possible before filing for bankruptcy.  A bankruptcy application form is available while filing for bankruptcy which will contain all the necessary information like the personal, financial status, secured debts, non secured debts, recent financial activities, creditors, assets, tax returns etc.  This can run to nearly 20 pages or more.  It also serves as a petition to the local court.  Four copies including the original copy has to be submitted, one copy can be retained by the debtor for any future reference.  A time period will be given by the court say one month to process the case and prevents the creditors from taking the property from the debtor during such time.  A meeting will be called to settle the issue between the debtor and the creditor.  The judge can intervene in case of any objection.  If everything goes on smoothly, the debtor will be notified to discharge form all his debts within four or six months time by the court.

Bankruptcy filing online:

Bankruptcy can also be filed online, as the application form can be downloaded which is normally nine pages in length.  All information needs to be provided and they have to authentic.  In case of false representations and claims, it will lead to fine or imprisonment.  This online form will be transferred to the actual petition containing 20 pages.  The internet provides all the necessary help in filing bankruptcy applications, still it is better to take advice from a bankruptcy lawyer to avoid any mistakes.