Bankruptcy Meaning

Bankruptcy is a legal formality or a proceeding in which a business firm or an individual is unable to pay back their outstanding debts to the banker or a creditor. The process of bankruptcy needs a petition to be filed by the debtor or on behalf of creditors.

The debtor needs to complete the filing formalities to defend the creditor’s proceedings and to get relived from the debt obligations.

Would I be held responsible for any debt that I co – signed

Yes, if you have co – signed a debt and if the same is in default then it has a negative effect on your credit score.

Would I lose all my property if I file for bankruptcy

Certain properties of the debtor are exempted from the bankruptcy proceedings. Exemption laws differ from state to state. In general practice properties which are very essential for the debtor for his livelihood. In addition, bankruptcy law contains federal exemptions, which you can use when you are in bankruptcy, at least in some states.

Is it mandatory to list all my incomes and assets in the bankruptcy petition

The Bankruptcy Petition requires the debtor to list all assets, liabilities, expenses and income. The Bankruptcy Petition is filed under penalty of perjury. If the debtor hides his asset or fails to list an asset in the petition it may result in the dismissal of the petition or the prosecution for bankruptcy fraud. Bankruptcy process allows the person to amend the person to amend the petition however if the amendment is not made in time or the asset was a significant asset and it appears that there was a deliberate attempt to hide it, the bankruptcy trustee may deny the discharge, dismiss the petition or refer the matter for investigation under bankruptcy fraud.

Is it possible for me to change over from one chapter to another chapter after I have filed for bankruptcy

Generally, bankruptcy process allows the debtor to convert his petition one time to any other chapter than the one under which he has filed the petition. The debtor is only allowed to transfer the case to any other chapter for which he is eligible.

What would be the consequences if I transfer my assets to a third party to protect them from bankruptcy proceedings

Transferring of assets held by the debtor to third party to prevent it from bankruptcy proceedings is considered as a case of fraudulent conveyance. Such transfers are considered as fraud if they are made within one year before filing for bankruptcy and done with the intent to prevent a creditor from retaining the asset.

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How long does bankruptcy remain on my credit report

All discharged bankruptcies remain on a person’s credit report for a period of 10 years. A dismissed Chapter 13 bankruptcy will remain for a period of 7 years and a dismissed Chapter 7 bankruptcy remains for a period of 10 years, but generally it is customary practice for those to be removed from the credit report of the person after 7 years.

What will be the effect of filing for bankruptcy on my credit report

Filing for bankruptcy will have negative effect on a person’s credit report. Negative entry appearing on a person’s credit report reveals to both current and future creditors, that the person has defaulted on his or her debt and can no longer pay as agreed. Filing for bankruptcy will usually lower credit score of a person by somewhere between 100-300 points. The impact that filing for bankruptcy creates on one’s credit score depends on several factors such as prior credit history, number of accounts in bankruptcy, number of accounts being reaffirmed, balances owed by the person, repeatedly filing for bankruptcy and accuracy of the credit report.

Can I do anything to clear “Bankruptcy” from my credit report

It is not possible for a person to remove the scars of bankruptcy from his credit report before a period of 10 years. A person can reshape his credit report during these ten years by adopting better practices and strategies. A person can adopt proper guidelines that can save from further despair. Even though the effects of bankruptcy persist within the credit report for a period of ten years, the credit reporting agencies normally remove them from the report after seven years.

What are the advantages and disadvantages of filing for bankruptcy

Advantages of filing for bankruptcy are - no minimum or maximum debt requirement, any amount of debt can be discharged, unpaid balances after the distribution of assets are discharged, wages earned and property acquired after discharge can be maintained by the debtor and most of the proceedings are completed within 3-6 months.

Disadvantages of the bankruptcy filing are - all nonexempt properties of the debtor are sold by the trustee, some kind of debts are not discharged (e.g.:- mortgage lien), credit rating of the debtor is damaged and bankruptcy filing can be made only once in six years.

How much would the bankruptcy filing cost me

Bankruptcy filing costs differs according to the chapter under which it is filed.

For bankruptcy filing under Chapter 7 it costs a total of $299. (Filing fee - $245, administrative or miscellaneous fee - $39, and trustee surcharge - $15)

For bankruptcy filing under Chapter 13 it costs a total of $274. (Filing fee - $235 and administrative fee - $39)

For Chapter 11 bankruptcy filing, which is exclusively available to businesses, cost of filing is $1,000. These costs are subject to periodical changes which are made to adjust inflation rates. Other than filing fees there are attorney’s fees, which generally range from $1,000 to $3,000 depending on the state and the specific facts of the debtor’s case.

Can I file for bankruptcy without a lawyer

There is no bar upon the individuals for filing a bankruptcy case without an attorney or "pro se". Under the bankruptcy laws but it is extremely difficult for the individual to do it successfully in the practical scenario. Corporations and partnerships must have an attorney to file a bankruptcy case.

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