Debt Relief Cases And Bankruptcy Court Proceedings
The global economic situation is tough nowadays that there is no telling which industry is going to get hit with bankruptcy. A few years back we have seen some well known financial companies get into mergers or buy outs in order to save themselves from insolvency. Small businesses and business owners, however, saw the lifeline for their financial woes in filing for bankruptcy. Declaring a business or an entity as bankrupt can help prevent foreclosures, harassment from creditors and pave the way for a fresh financial start. However, this should not be seen as an easy way out on debts. Some may even find filing for bankruptcy very tedious and exhausting. Getting a fresh start away from creditors takes some effort to resolve as the debtors need to go through bankruptcy court proceedings before they can get the full benefits of these federal laws.
The Bankruptcy Rules and Bankruptcy Codes were instituted to set the legal procedures that will be used in dealing with debt problems of both businesses and individuals. The idea behind such proceedings is to determine whether the debtor deserves to be discharged of his obligations and to resolve claim contentions of the creditors. Such proceedings are presided over by a United States bankruptcy judge and held in bankruptcy court of the judicial districts in the United States. Filing for an insolvency case is a complex process which involves legal concepts that a debtor should clearly understand before filing his case. There are publications that contain a glossary of bankruptcy terminology that explain these concepts in layman’s terms to the debtor.
There are several bankruptcy cases that may be filed which are identified according to the chapters of the bankruptcy code. The six basic types of cases include Chapters 7, 9, 11, 12, 13 and 15. The debt case filed is usually dependent on the nature of the debt, the sort of assets as well as their values, and the recent income of the debtor. Chapter 7 and 13 are the most common cases filed in the bankruptcy court by individuals. Chapter 7 filings usually involve cases where the debtor agrees to liquidate his assets and properties according to the provisions of the bankruptcy code. Chapter 9 covers the rights of financially distressed municipality to recover by means of debt reorganization. The rehabilitation of a business through debt reorganization is also utilized in Chapter 11 with the terms applying to corporations or partnerships. Chapter 11 cases may either be filed by the debtor on a voluntary basis or the creditors may file the petition themselves provided that they meet the court requirements.
Debtors who are identified as family farmers or family fishermen with regular annual income may resolve their debt concerns by filing a Chapter 12 case. This involves the formulation of a debt repayment structure where they can pay their creditors through installments that usually spread in three to five years time. Chapter 13 cases cover individuals with a regular income who would like to retain their properties and settle their debts through an adjusted payment term that spans three to five years. This case will favor debtors who want to save their homes from foreclosure and buy themselves time to settle debts from single and multiple creditors. Cross border cases or insolvency cases that involve assets, debtors, creditors and other parties of interest from countries other than the United States, are covered by Chapter 15.
The filing of these insolvency cases in the bankruptcy court are mostly initiated by the debtors. They have the option to represent themselves or secure the services of a legal expert to handle their case. However, debtors who are considering self-representation should keep in mind that bankruptcy laws may differ in each state and one misstep may result to non-discharge of their debts. Since these are fairly complex legal matters it is advisable to lawyer up. There are pro bono or free legal services offered in local states or local bar association that they can avail of.
Businesses or individuals who are in financial distress are required to undergo credit counseling from an accredited institution within 180 days before case filing. Once the cases have been filed it is usually the trustee and the lawyers who handle most of the proceedings. Some debtors may be required to attend a 341 meeting to face their creditors as mandated by the section 341 of the Bankruptcy Code. The creditors should file their claim and share in distribution within the set deadline for them to maintain their rights in whatever proceeds that may arise from the case. The debtors on the other hand should comply with all the provisions that are stipulated in the discharge notice once the ruling and formal notifications have been made.
