The history of the word bankruptcy starts with the Latin fusion of the word “broken” and “bench”. It used to indicate failure to meet financial obligations, specifically when a banker stops conducting business. Others theorize other origins of the word like “broken bank” in ancient Italy and others. The bankruptcy process has a legal background that was officially declared in old England back in 1542. The punishment of the failure to meet obligations or debt ranged in severity, depending on the debt. They viewed it as a criminal offense that could even reach a death sentence in certain cases. Fortunately, the world progressed, and bankruptcy doesn’t carry as much stigma as it used to. Even though it’s still a last-resort kind of solution, it can still be a very beneficial one.
The Bankruptcy Process
Since it’s a case-by-case process, some bankruptcy declarations only reduce the debt, not wipe it completely. As mentioned on https://antonybatty.com/individual-voluntary-arrangement/, a more convenient alternative would be filing an individual voluntary agreement (IVA). Creditors are often more welcoming of IVAs because they provide better returns. Once you file a declaration of bankruptcy, your creditors are not allowed to seek you to collect their debts, and doing so becomes illegal.
Chapter 7 Bankruptcy
Known as the most common form of bankruptcy in the US, Chapter 7 bankruptcy is also referred to as liquidation bankruptcy. It will dissolute any debts in the form of credit cards, personal loans, and any other unsecured lines of money. To be able to obtain it, you’ll need to secure a minimum income, depending on the state you live in. You may need to sell some assets that aren’t covered under the Chapter 7 law. This process can actually last from 4 to 6 months.
Chapter 13 Bankruptcy
The second most frequently declared form of bankruptcy is Chapter 13. It’s more of a reorganizational plan geared towards the repayment of bigger loans and certain creditors. Unlike Chapter 7, not all debt will be dissolved, and you’ll still pay your creditors, but over a pretty reasonable pace. No properties have to be liquidated or exempt because the process itself can take from 3 to 5 years. You’ll also have to secure proof of regular income to show that you’ll be able to maintain monthly payments in a punctual manner.
Honesty and Straightforwardness
When you’re filing for bankruptcy, you need to keep in mind that this process hinges on honesty and straightforwardness. Discharging the debt is not a simple decision that courts can make without being absolutely sure that the filing party is saying the truth about not being able to pay their debts. Since your assets, amount of debt, and creditors’ information will be required by the court, it’s better to provide full and complete disclosure. There is also the risk of a bankruptcy fraud charge, which is a serious federal crime.
The federal law includes a process that is made to help individuals and professional entities to gain shelter or protection from their debtors or creditors. This isn’t designed to help them get away from debt unscathed, but it’s still a method that can be used to get a fresh new financial start in their lives. In other words, bankruptcy can actually eliminate the need to pay financial obligations like mortgage, car loans, credit lines, and many others in a legal sense when faced with a serious financial predicament.