The Two Most Prevalent Kinds Of Insolvency

Bankruptcy, in its inititial years, was formulated for the benefit of creditors. This gave power to the creditor to confiscate all the property of the borrower to compensate for his loss. This scheme not only left the borrower broke but also entailed him to serving imprisonment. However, the system has been transformed a good deal with the passage of time. In present days, bankruptcy is generally filed by a debtor who admits his inability to pay back his loans. This enables the debtor to easily remodel his finances and attempt at partially repaying what he owes while carrying on with his business. The legal norm that governs bankruptcy differs from country to country as well as from state to state. For instance, in the US follows a Bankruptcy Code based on which there are six different kinds of bankruptcy called Chapters while Netherlands abides by the Dutch Bankruptcy Code. Again, Tampa Chapter 7, popularly termed as 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 managing the bankruptcy takes the proceeds from these assets and splits it among the creditors. In this way the debtor is relieved of a part of or the whole loan amount, as may be eligible aganst the proceeds derived from the surrendered assets. The US bankruptcy laws allow a citizen to file for this type of bankruptcy only once in every eight years. Post the amendment made in the year 2005, the person applying must also go through a test to find out whether he or she is qualified to file for this bankruptcy. Failure in this test leads to the rejection of the bankruptcy application and at times recommends Wage Earner Bankruptcy to the applicant. It is necessary to be advised by a competent bankruptcy attorney for finding the best way to deal with this insolvency.

As is evident from the name, Wage Earner Bankruptcy is meant for those who have a steady flow of earnings. Under this type, the applicant is required to go for a repayment plan wherein the applicant chooses to pay off his debt with a portion of his income. Depending on factors like income, expenditure, assets, etc., the repayment tenure can be anything from three to five years. The tenure cannot cross the five years’ limit. In this case too the trustee plays a pivotal role. All payments are made to the trustee who then hands over the money to the creditors involved. Again, in case of the debtor’s failure to pay, legal proceedings will act upon the trustee’s motion.

As is evident, it is essential to hire a bankruptcy lawyer or attorney who possesses the necessary expertise and efficiency to handle your case. It is also essential that you maintain high amount of transparency with your lawyer. Failing to comply could mean that you are committing strategic bankruptcy or even bankruptcy fraud, both of which can have adverse effects on your bankruptcy case.