When an individual or an organization is legally declared unable to pay creditors, then, the person or organization is bankrupt. This can be as a result of job loss, disability status or financial duress caused by an unanticipated crisis. bankruptcy conveys that the person or organization is financially unstable, and weak. By a personal view, it is a method of settling a debt that is greater than one. Bankruptcy sets debtors free; with bankruptcy; debtors can go free and start afresh. This is a process by which the assets of the debtor are shared out to the creditors – hence the debtor does not have to worry about the creditors. who declares that somebody or organization is bankrupt, what will be needed?
People, individuals or organization can be declared bankrupt in three ways: first, the debtor or individual, may declare himself or herself bankrupt. An individual can also be declared bankrupt by creditors, that have a minimum of ?750 with the person or organization. A supervisor with legal rights from IVA, can declare an individual bankrupt.
If bankruptcy is declared by creditors, the debtor is not expected to dispute the claims. Any attempt to dispute the issue, will be listened to, if the debtor could reach a settlement before the bankruptcy petition is due. manipulating things will sure be too costly, or impossible.
There are three main types of bankruptcy; under which an individual or municipality can file. First, is under chapter 7, which involves a total liquidation of the debtors’ assets. But the debtors’ assets and property, are kept safe with exemption allowance. The second is under chapter 9, for creditors to restructure their debt.
The third piece connotes chapters 11, 12, and 13, it allows debtors to pay their debts without infringing on the right to their assets. Therefore, to avoid total assets liquidation, they have to go for bankruptcy exemption allowance.
Bankruptcy exemption allowance allows for a stay to be placed on the debtor’s assets and property, immediately a bankruptcy petition is filed. Its purpose is to bridge creditors from trying to get their money back, from the assets and property of the debtor. A creditor that acts against this stay, is taken to court for damages. Federal law has marked out that this allowance is only permitted in the following areas: property; automobiles; belongings; jewelry; career-related items; life insurance policies; health aids; and government benefit earnings and stock earnings.
There is no doubt that bankruptcy exemption is very good, but it is not every state that allows individuals this option. Concequently, creditors and debtors are expected to be in terms with their federal and state legal stipulations, before filing a bankruptcy petition.
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