Bankruptcy, or simply the condition in which an individual is unable to compensate their debtors, is a common occurrence in America. From 1980 to 2005, more than two million bankruptcy cases have been filed by debtors across the country. In many cases, bankruptcy is not a matter of reckless spending, but it is a definite matter of financial hardship for many people who simply cannot afford to deal with sudden unexpectancies such as job loss and costly medical bills. Truth be told, many financial experts will discourage filing for bankruptcy to escape your debt. Make sure you’re fully informed before going down this road. Here is some vital information to help you get more affiliated with the current bankruptcy laws.
Surprisingly, bankruptcy is an essential fabric in the United States Constitution. The American founders were fixated on creating a system in which individuals burdened with a massive debt could relieve themselves and build a fresh start. According to the U.S. Bankruptcy Code, here are ways people can choose to file bankruptcy.
Liquidation
This is the basic chapter of bankruptcy. In this process, the court will assign a trustee to oversee the liquidation of all of your assets to pay your debtors. Though, this doesn’t necessarily pertain to your vital possessions, such as your primary residence or vehicle.
Adjustment of Debts
For those who don’t apply to liquidation due to income constraints, this process entails paying off your debtors within three to five years, using your regular income and other assets.
Reorganization
In this process, debtors are mandated by the court to submit a plan to reorganize their finances to pay back creditors in 120 days. This chapter allows individuals to pay back their debt and afford their living expenses.