Which Insolvency Type Is Apt For You?
Bankruptcy, in its inititial years, was formulated for the benefit of lenders. This gave power to the creditor to seize all the property of the borrower to compensate for his loss. This scheme not only left the borrower penniless but also entailed him to serving imprisonment. However, the mechanism has been transformed a good deal over time. In modern times, bankruptcy is normally filed by a debtor who acknowledges his inability to repay his loans. This enables the debtor to conveniently remodel his finances and attempt at partially repaying what he owes while continuing his business. The legislation that governs bankruptcy differs from country to country and even from state to state. For example, in the US adheres to a Bankruptcy Code according to which there are six different kinds of bankruptcy known as Chapters while Netherlands follows the Dutch Bankruptcy Code. Again, Tampa Chapter 7, more commonly called straight bankruptcy, and Tampa Chapter 13, also known as Wage Earner Bankruptcy, may have laws that are different from the ones followed in other states of the US.
When an individual files for Straight Bankruptcy, he or she is required to give up all properties that are free from taxes and other liabilities. The trustee handling the bankruptcy takes the returns of these assets and divides it among the creditors. This is how the debtor is relieved of a portion of or the whole loan amount, as may be applicable for the proceeds derived from the surrendered possession. The US bankruptcy laws permits a citizen to file for this type of insolvency just once in every eight years. After the amendment made in the year 2005, the applicant must also undergo a test to find out whether he or she is eligible to file for this bankruptcy. Failure in this test leads to the rejection of the bankruptcy application and sometimes recommends Wage Earner Bankruptcy to the applicant. It is important to be advised by a competent bankruptcy attorney for finding the best way to deal with this situation.
As the name suggests, Wage Earner Bankruptcy is meant for those who have a steady flow of income. Under this type, the debtor is required to opt for a repayment plan in which the applicant chooses to repay his debt with a portion of his income. Based on factors like income, expense, assets, etc., the repayment period can be anything between three years and five years. The tenure cannot cross the five years’ cap. In this case too the trustee plays a pivotal role. Debtors pay the trustee who then hands over the money to the creditors involved. Again, in case of the debtor’s failure to make the payment, legal proceedings will act upon the trustee’s motion.
As is evident, it is important to hire a bankruptcy lawyer or attorney who possesses the necessary expertise and potential to handle your case. It is also essential that you maintain high amount of transparency with your lawyer. Failing to adhere could mean that you are committing strategic bankruptcy or even bankruptcy fraud, both of which can have nervous effects on your bankruptcy case.