Bankruptcy occurs when the federal system of statues and courts authorize insolvent individuals or businesses the ability to place their financial affairs under the bankruptcy court's control. When the debtor exceeds his or her ability to pay, the debtor may file a petition with the bankruptcy court for voluntary bankruptcy.
There are two types of personal bankruptcy: Chapter 7 and Chapter 13. Chapter 7 bankruptcy and Chapter 13 bankruptcy are legal proceedings that are avaliable to a person to cope with a financial crisis. Personal bankruptcy must be filed in a federal bankruptcy court. You will have to pay a minimial fee for court and attorney costs.
- Chapter 7 bankruptcy:involves the liquidation of all your assets that are not exempt from the bankruptcy settlement.
- Chapter 13 bankruptcy:is a court-ordered and approved repayment plan to your creditors.
The following questions were answered during a telephone interview with Robert M. Matson from the law offices of Akin, Webster, & Matson, PC Attorney at Law:
1) What is the process of filing for bankruptcy?
- First, we invite all potential clients for a free consultation. Second, upon arriving for a free consultation, we tell the clients to bring in a list of their credits as well as the total amount of income he or she might receive. Finally, after going over the client's credit history and income, we notify the client's to inform them on whether or not they should file for bankruptcy.
2) How long does filing for bankruptcy stay on your credit report?
- Filing for Chapter 7 bankruptcy stays on your credit report for ten years. Filing for Chapter 13 stays on your creit report for seven years or until you pay off your debt in full.
3) Does filing for bankruptcy make your credit bad?
- Yes, because somewhere in the future for instance let's say you want to take out a loan. If the person you are trying to get a loan from pulls up your credit report and sees that you filed for bankruptcy in the past, this person may think that your are incapable of paying off the loan.
4) How do you determine the fee that you charge clients who file for bankruptcy?
- The fee that clients are charged for filing for bankruptcy depends on the caseload and what type of bankruptcy the client is filing. In Chapter 7 bankruptcy cases the fee is based upon the client's assets. If the client has a large amount of assets, the higher the fee. If the client has a small amount of assets, the lower the fee. In Chapter 13 bankruptcy cases the judge determines the fee.
5) Are they any other forms of bankruptcy besides Chapter 7 and Chapter 13?
- Yes, their is Chapter 11 and Chapter 12 bankruptcy;however, Chapter 7 and Chapter 13 are the two most common forms of filing for individual bankruptcy.
- Chapter 11 bankruptcy: is the filing of bankruptcy by corporations and some individuals. This form of bankruptcy is rarely filed by individuals because it is rather expensive.
- Chapter 12 bankruptcy: is the filing of bankruptcy by farmers.
6) What is the difference between filing for Chapter 7 bankruptcy and Chapter 13 bankruptcy besides, the obvious of Chapter 7 being a liquidation of all you assets and Chapter 13 being court-ordered?
- In a Chapter 7 bankruptcy case the court appoints a trustee to handle the liquidation of your property. The trustee can sell or turn over your property to your creditors. The court then discharges your debts and you will become debt free.
- In a Chapter 13 bankruptcy case you are allowed to keep your property. This form of bankruptcy allows you to use future income to pay back your debts over a three to five year period. Once you have completed payments under this form of bankruptcy, your debts will be discharged by the court.
Most financial experts agree that bankruptcy should always be the last resort used for managing your debts. Bankruptcy has long lasting results. Filing for bankruptcy remains on your credit report for a period of ten years, making it more difficult to obtain credit in the future.