Solving Debt Problems With Bankruptcy Relief

Obtaining legal relief from bankruptcy is a vehicle provided for under Federal laws. During the course of the bankruptcy claim form process, the assets and the liabilities of the debtor are assessed. Based on the specific situation of the debtor and the amount of debt owed, the type of bankruptcy to be filed will be determined. Most individuals end up filing a Chapter 7 bankruptcy or filing Chapter 13 bankruptcy. In most instances, business entities will reorganize their debts under the structure of a Chapter 11 bankruptcy.

There are some very specific rules and regulations when it comes to filing for bankruptcy and which Chapter is applicable. Because of the complexity of this issue, it is recommended that people get help with bankruptcy from an experienced lawyer who can guide them through the process of attaining bankruptcy relief. Obtaining legal relief from bankruptcy is a step that is considered drastic and it should not be undertaken lightly.

In many cases, people decide that seeking legal relief is the course they must take after there has been some sort of extreme financial setback or some type of emergency. Many times the root cause of the financial problems comes because of the loss of a job, a business failure, extended illness or injury, divorce or the death of a family member.

When the financial pressures mount to the breaking point, legal relief can become the only option someone is able to exercise in order to find a way to help debts and secure a clean slate. For many years, there was a significant stigma associated with people who ended up filing for bankruptcy. However, this stigma has faded somewhat in more recent years, as it is seen more in a light of giving people an opportunity to start over again rather than as a failure.

There are two main types of legal relief from bankruptcy. The first type, which was the most common until the 2005 bankruptcy reform legislation, is liquidation. Since the new bankrupt reform rules, most of the time only those with a very low income or those who are considered to be less stable debtors are eligible for the liquidation option. The second type of bankruptcy is reorganization. This type allows for the debts to be structured and paid over a period of time.

Liquidation bankruptcy relief is governed under the mandates of the Chapter 7 bankruptcy claim form and can be filed by either businesses or by individuals. When filing for bankruptcy under Chapter 7, the bankruptcy court issues what is called an "automatic stay," which stops all attempts to collect any debts that are included in the bankruptcy court record filing. A bankruptcy trustee is assigned to the case and is responsible to collect any "nonexempt" property, to liquidate it, and then distribute the proceeds of the liquidation of assets to the creditors. The distribution is done in order of priority which is determined by the bankruptcy statues.

In most cases, reorganization bankruptcy relief is implemented in situations where there is sufficient future income that can be used in a repayment plan. Usually the plan is for repayment of a portion of the full debt and the amount of the repayment is determined by the trustee and based on the debtors ability to pay. Business and individuals with a great deal of debt, file under Chapter 11 bankruptcy. In most cases, however, individuals who need to reorganize their debts will file Chapter 13 bankruptcy.

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Please note that the information contained on this website is for information purposes only. We strongly suggest you seek professional advice from qualified and competent financial advisors, before making any financial decisions based on the information provided on this website. See our disclaimer for full details.

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