Bankruptcy Statutes Within The United States?

Answer 1

Bankruptcy is a large financial change that will affect people for years after it has been declared. Due to dramatic changes in the financial market, the laws and statutes of bankruptcy have changed in the last few years. While it used to be a much more streamlined process, there are now quite a few rules and obligations necessary throughout. Here are a few key points when considering bankruptcy as an option.

The United States is one of the few countries in which bankruptcy is a federal mandated law. It is a means in which debt is removed or a payment process is developed for overwhelming credit. Federal law also mandates that certain forms of financial counseling must be undertaken before the process is even started. This is a relatively new law which accompanied the extended periods that bankruptcy will show up on credit scores. It is a necessary step as it allows those considering bankruptcy to understand the severity of the option and the nuances of the entire process.

In terms of personal bankruptcy, there are currently two options. Before either of these options can be carried out, mandatory credit counseling must take place. The United States government maintains a list of approved credit counselors, credit agencies, and financial counselors that may be consulted before filing bankruptcy. This must be done within six months before declaration. Chapter 7 is the more severe form of bankruptcy in which one could lose all valuable possessions, outside of a handful of exempt accounts, and the slate is then wiped clean. Chapter 13 is the shorter form of personal bankruptcy in which debts are consolidated and sometimes lowered and a repayment plan is developed. In order to exit bankruptcy, another personal financial management course must be taken online, on the phone, or in person.

Chapter 11 bankruptcy is an option for companies that have collected an overwhelming amount of debt and need to setup a court approved repayment plan. A trustee may be appointed with Chapter 11 to take control of the failing business' assets and properties.

With the increasing complexity and seriousness of bankruptcy, utilizing a financial professional or bankruptcy lawyer will almost always be necessary before considering this process. While this is a federal law, it is important to identify state specific rules on bankruptcy before the process is undertaken.