How To File For Bankruptcy
Chapter 7 bankruptcy or straight bankruptcy calls for a liquidation proceeding of all the assets of the debtor. All the debtor’s non-exempt properties are turned over to the trustee of the bankruptcy procedure. The trustee, in turn, would covert it to cash so that payment would be distributed to the respective creditors. Bankruptcy laws provide for all the steps necessary to achieve the full implementation of this ruling.
Who Files For Bankruptcy?
The bankruptcy law also determines the people who are eligible to file for bankruptcy. There are several laws created. These are:
- Under Chapter 7 bankruptcy, an individual, partnership, corporation, or any other business entity may file for bankruptcy regardless of how much they owe or whether the debtor itself is solvent or insolvent.
- Under Chapter 13 bankruptcy law, self-employed individuals and those who are managing a sole proprietorship business are eligible in filing bankruptcy. But this bankruptcy law requires that the person’s unsecured debt is lesser than $307,675 and his secured debts are no more than $922,975. Corporations and partnerships are not allowed to file bankruptcy under this law.
- Chapter 11 bankruptcy law is commonly used by commercial businesses and large enterprises that wish to continue its operation after filing for bankruptcy. But they are required to follow a court-approved reorganization plan to repay their creditors before they can resume business.
- Chapter 12 of the bankruptcy law is for family fishermen and farmers that have a regular annual income. Here, the debtors propose to pay debts over a certain period of time, usually not more than 3 years. But with the intervention of the US Bankruptcy Court, the time frame can be extended up to 5 years but never longer than that.
- Under Chapter 9 of the bankruptcy law, municipalities may file for bankruptcy. A municipality is defined as a public agency, an instrumentality of a State, or a public agency. To qualify, the said municipality has to be duly authorized by the State laws or by a government official to be eligible. Furthermore, the municipality should also be insolvent and is willing to come up with a plan to address its debts.