Bankruptcy is one of the major options people in financially unstable situations choose. Bankruptcy may be a last resort and the best choice for people whose debts are overwhelming with no way to service it. Whether you are faced with unpaid mortgage loans and a threat of foreclosure, unpaid credit card debts, student loans or more, bankruptcy may be the last option to clear your name off the debtor’s list and also to stop the collection efforts of creditors.
While bankruptcy guarantees an automatic stay which prevents creditors and collection officers from harassing you, there is a need to understand that this option may also significantly affect your credit rating. If you are faced with enormous debts with no way of servicing it, you may want to consider filing for bankruptcy under chapter 7 or chapter 13. However, for businesses, bankruptcy can be filed under chapter 11 or chapter 13.
As an individual going through a rough time, there is a need for you to be aware of your options, especially when it comes to bankruptcy and if you should get a bankruptcy lawyer involved. Below are some of the things you need to know about bankruptcy under chapter 7 or chapter 13.
Filing for Bankruptcy Under Chapter 7
Chapter 7 bankruptcy is oftentimes regarded as liquidation bankruptcy. Chapter 7 derives its name from the attempt at liquidating all assets belonging to the debtor in order to cater and service the debts owed. While most people envision that they will be let off the hook after filing for Chapter 7, on the contrary, the debtor will be forgiven of all the debts that qualify for discharge while still bearing the responsibility of others that do not qualify for discharge. Under Chapter 7 bankruptcy, the applicant will need to pass the mean test which has been designed to weigh the chances of the applicant’s qualifications. Applicants that are deemed eligible for the chapter 7 bankruptcy will be those who do not have any form of income to service their debts. In addition, such persons must have been found to have little properties that are not enough to cover the debt owed.
Filing for Bankruptcy Under Chapter 13
Chapter 13 bankruptcy is designed for people who do not pass the chapter 7 bankruptcy test. Filing for bankruptcy under chapter 13 can be done multiple times and it allows for the debtor to get a favorable repayment term. Under chapter 13 bankruptcy, the debtor will be required to propose a repayment plan which may be accepted or rejected by the bankruptcy court based on how it is viewed in line with the set standards. Generally, the debts owed by the debtor are reorganized such that the debtor can pay it off within a period of 3-5 years. However, after this period, if the debtor is unable to service the debt fully, then he or she may be forgiven.
What Is Emergency Bankruptcy
Emergency bankruptcy can also be referred to as skeleton bankruptcy. This process is quite streamlined and has been designed to help the debtor get collection agencies and creditors off their backs. If as a debtor, you require a way to ensure that you are not constantly harassed by the collection efforts of collection agencies, an emergency bankruptcy may be the best option to choose.
When a debtor files for emergency bankruptcy, he or she is granted an automatic stay which means that a stop will be put to all the collection efforts of creditors and collection agencies. Emergency bankruptcy can also allow the debtor access to some other benefits. If as a debtor, you need to get the collection agencies off your back, you can do so by simply filling in some online forms and then submitting the hard copies of the document later.
Emergency bankruptcy is a favorable choice in a number of situations chief of which is when you are late on your mortgage payment and are being faced with possible foreclosure or when you are late on your car payment and are faced with possible repossession. However, if a person has completed the online form which grants them an automatic stay, additional documents must be completed and submitted within a 14 day period or the petition for bankruptcy will be effectively dismissed. To ensure that the emergency bankruptcy also stays in action, the debtor may also need to stay in line with certain rules and guidelines.
What Are The Documents Required For an Emergency Bankruptcy?
For an emergency bankruptcy to kick off, the debtor will be required to file a petition which is an essential part of the process. The debtor will also need to have decided which bankruptcy is best for them, whether chapter 7 or chapter 13 bankruptcy. To ensure that the forms and documents are adequately filled, the debtor will also be required to provide documents to support their choice of the bankruptcy filing. As a business in need of relief from debt, you may be required to file under Chapter 11, although this happens only in rare cases.
As part of the documents to be submitted, the applicant or petitioner will also be required to provide all valuable information regarding their creditor. Information to be supplied include contact information, nature of the debt, the amount owed and more. Additional information required may depend on the requirement which is specific to the type of bankruptcy that is being filed for.
Creditors may also be required to name sheriffs, attorneys, collection agencies, and others as part of the body of people who seek repayment of debt owed by the debtor. Bankruptcy filing requires that a debtor enrolls and takes the credit counseling course before filing and thus, the debtor may also be required to submit information relating to their participation in the course or a waiver for the course.
In addition, the debtor will be required to complete the Form B121, a social security information form. A filing fee is also associated with filing for an emergency bankruptcy. For people who are unable to make the payment at once, they can seek some form of financial plan to alleviate the burden.
Other Paperwork to be Completed
In some cases, debtors may be required to complete additional paperwork as part of the emergency bankruptcy filing process. It is important and strongly recommended that debtors pay attention to these forms no matter how trivial or unnecessary they may appear.
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