It can be scary to find yourself in a tough financial situation. Even scarier is the thought of having to deal with bankruptcy, especially since most people and businesses don't take the time to learn about the laws that go along with it. Since many people who owe money are embarrassed about it, they often don't want to ask too many questions about the process. Since filing for bankruptcy is one of the most important financial decisions a person or business will ever make, it is important to know the right information about bankruptcy before starting the process.
In the United States, all information about bankruptcy is handled by the federal court systems, which also make the laws for the process. This doesn't mean that a person has to go to Washington, D.C., to file, though. During proceedings, each state will deal with both people and businesses. To do this, you might have to go all the way to the state capital. The federal laws on bankruptcy information say that the purpose of these laws is to give a debtor who is honest but makes mistakes a chance to start over.
One of the most important things to know about bankruptcy is that the courts don't come to the person or business that wants to file. Instead, the person or business has to go to the courts. By filing a petition called a Statement of Intentions, the person in debt tells the court that they want to file for bankruptcy.
Even if a debtor files the Statement of Intentions, that doesn't always mean they will go through the whole legal process. The debtor will have to fill out forms that will give the courts important information about the bankruptcy. With these forms, the courts can look at a debtor's credit history, see who they owe money to and how much, and see where they work now and in the past. Based on this information, the federal court system will decide whether or not a debtor can continue with the court case.
Keep in mind that the debtor is not required to hire an attorney to help them through the process, but attorneys can be a great source of information about bankruptcy. Many people who owe money are afraid to hire an attorney because they think they will have to pay extra fees they can't afford. However, most attorneys' fees are fair given the situation. When a debtor just wants to get information about bankruptcy, an attorney will usually not charge for the first meeting.
Most people don't know much about bankruptcy, which is a shame. This leads to misunderstandings about bankruptcy. One of the biggest myths about bankruptcy is that the courts will take and keep all of the person's things. Since there are many different types of bankruptcy (called "chapters"), there are also many different ways to pay back debts. Only Chapter 7 requires the total sale of all assets. Even with Chapter 7, debtors can keep things that are essential to their lives.
One more important thing to remember about bankruptcy is that a new law called the Bankruptcy Abuse Prevention and Consumer Protection Act is in place. This law was passed in 2005 to stop people from making false bankruptcy claims. It could make it harder to convince the courts of a claim.
Filing for Chapter 13 and Chapter 11, which are called reorganisation plans, hasn't changed much, but filing for Chapter 7 has gotten harder. Before the new law, debtors didn't have to take classes on debt. Now, Chapter 7 debtors have to take Credit Counseling and Financial management classes before the process can be finished.
