Bankruptcy is a legal procedure designed to help people who are unable to pay off their debts within a reasonable time and whose circumstances are unlikely to change in the foreseeable future. In order to apply for bankruptcy, the unsecured debts in question have to outweigh the applicant’s assets; these include their property and cars. The Bankruptcy debt solution was developed to ensure that the creditors receive a small sum of what they are owed. In order to do so the applicants may be required to sell their assets. Any money raised from these sales will be split between the creditors.
Bankruptcy is treated seriously because it is based on federal laws that are strongly enforced. Bankruptcy takes place in Federal courts, and Federal laws outrank state and local laws. When you learn, from any source, that your debtor has filed for bankruptcy protection, one must immediately stop all collection activities. One must not do anything to recover that debt until you get written permission from the bankruptcy court, which is not automatic and usually does not happen. Not only is filing for bankruptcy a serious matter, it can also be quite expensive. Bankruptcy should therefore only be considered as a last resort debt solution.
As bankruptcy may be used as a solution by businesses to draw a line under their debt problems, the term ‘personal bankruptcy’ is used to explain the act of someone entering into bankruptcy as an individual, rather than a business. When applying for bankruptcy, applicants will be appointed an Official Receiver (OR). The OR will take control of all assets (including money, property, and cars) and make sure that all creditors receive a fair share of the client’s assets. Depending on one’s individual situation, bankruptcy applicants may be required to make regular contributions towards their bankruptcy debt. These payments will usually last for three years. As a promise, make these payments, those whose circumstances qualify them to make contributions will be required to sign an Income Payments Agreement. If an applicant refuses to sign or doesn’t keep up with the payments, an Income Payment Order may be issued which will result in the money to be taken directly out of the applicant’s income.
When entering into individual bankruptcy, all applicants will be required to:
- Provide their appointed Official Receiver with full details or their finances, assets, and creditors.
- Hand all of their assets over to the OR, as well as any accompanying paperwork which may include bank statements, insurance policies, etc.
- Stop making payments to creditors.
- Stop using any credit card or bank accounts.
- Inform any creditor about their discharged bankruptcy when trying to obtain any credit.p’
- Inform their trustee or Insolvency practitioner when receiving any new income or assets while the personal bankruptcy is still in process.
- Although filing for bankruptcy has proven to provide a number of pros, this particular form of debt solution also comes hand in hand with numerous financial and legal consequences. A small selection of these consequences include:
- Bankrupt individuals lose the control of all their assets at the date of the bankruptcy, thus risk losing assets of value in order to pay off their debt.
- All bank accounts will be frozen and it may be difficult to obtain a new account free of charge.
Since Bankruptcy is a complex process, one should definitely consult with expertise bankruptcy attorneys who will be always available at Vanhelmerijck Lawoffices to serve you the best.