Bankruptcy is an option that often has to be considered where an individual cannot pay their debts as they fall due. A first time bankrupt will generally receive their discharge one year after the date of the Bankruptcy order. Although bankrupt has a bad stigma and is publicly advertised. It could be a useful option when dealing with individual insolvency cases.
Implications of Bankruptcy
• You cannot act as a company director.
• You may not practice as a charted accountant/lawyer.
• You may not act as a justice of the peace.
• You may not become a member of parliament.
• You may not become a member of the local authority.
• Your credit is affected for many years after the annulment.
• You may be publicly examined in court.
There are two basic types of Bankruptcy filings.
Chapter 7 Bankruptcy, sometimes call a straight Bankruptcy liquidation proceeding. A filling under Chapter 7 is called liquidation. It is the most common type Bankruptcy proceeding. The debtors turn overall non-exempt property to the Bankruptcy trustee who then converts it to cash for distribution to the creditors. The debtor receives a discharge of all dischargeable debts usually within four months. In the vast majority of cases the debtor has no assets that he would lose, so Chapter 7 will give that person a relatively quick “fresh start”. Chapter 7 Bankruptcy is the most common form of Bankruptcy filling in United States.
Advantages of Chapter 7 Bankruptcy
• Any debt amount can be completely cleared, and once you are discharged, you are 100% clear of debts.
• There is also no minimum amount of debt needed in order to file for it.
• Creditors no longer have any claim on you.
• It is very fast.
• You stand a very good chance of your claim being discharged in the next 4-6 months.
Disadvantages of Chapter 7 Bankruptcy
• You can loose all your property.
• Not all debts can be discharged.
• You can only file under Bankruptcy law Chapter 7 once every 6 years.
• Withdrawing you claim for Chapter 7 extremely difficult if not impossible.
• Your home loan co-signers can end up paying for your loans.
Chapter 13 Bankruptcy is also known as reorganization on Bankruptcy. Chapter 13 Bankruptcy is filled by individuals who want to pay off their debts over a period of three to five years. This type of Bankruptcy appeals to individuals who have no exempt property that they want to keep. It is also only an option for individuals who have predictable income and whose income is sufficient to pay their reasonable expenses with some amount left over to pay off their debts.
Advantages of Chapter 13 Bankruptcy
• You can keep both exempt and non-exempt properties.
• It helps avoid wage garnishment.
• Co-signers will be protected under this Chapter.
• Foreclosure on a home can be delayed.
• It can be filled immediately after Chapter 7 discharge to pay off any remaining lines.
Disadvantages of Chapter 13 Bankruptcy
• Chapter 13 Bankruptcy will appear on your credit report for 7 years.
• Legal fees may be higher.
• Not all debts are discharged under Chapter 13.
• The amount of debt you can discharge under Chapter 13 is limited.
• After you get a Bankruptcy discharge, you can get credit only at high interest rates.
