Facts You Must Know About Bankruptcy

 

Bankruptcy has many myths and half understood meaning for many. In this article, we will aim to understand bankruptcy and what is meant by it.

As per Wikipedia, “Bankruptcy is a legal status of a person or other entity that cannot repay the debts it owes to creditors. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debtor.”

Some important facts which are unknown to the common people about bankruptcy are:

bankruptcy-insolvency

  1. Bankruptcy & Insolvency:
  • Wikipedia says that – Sometimes bankruptcy is considered a synonym for insolvency. But bankruptcy and insolvency are two separate issues. Bankruptcy is not the only a legal status that an insolvent person or other entity may have.
  • Different countries have different systems with reference to bankruptcy and insolvency. For e.g. in the U.K., a person can be bankrupt but a company can only be insolvent. However, as per U.S. laws, bankruptcy is applied broadly to formal insolvency proceedings. Similarly in France, the French word “banqueroute” is used fraudulent bankruptcy, whereas the term “faillite” is used for bankruptcy.
  1. Social Stigma:
  • Tough times can come to anyone. The issue can arise due to many reasons. It could be due to unemployment, ill health, divorce, decrease of income, or any other issues.
  • Bankruptcy has happened to many people from all kinds of backgrounds. Even rich people or big corporations file for bankruptcy when they find their debts become too big to handle.
  • Today, bankruptcy is no more a social stigma. In fact it is a financial tool which helps you to start afresh and take control of your finances and life. So, there is no big cause of worry. You can relieve yourself from the stress of bankruptcy and start living your life again.

bankruptcy-insolvency1

  1. Handling Debtors:
  • Milwaukee bankruptcy attorney Michael Burr and the experts at Burr Law Office say that people making decisions about bankruptcy often feel like the deck is stacked against them. Bill collectors and debt holders are trained to make people think that the more money they owe, the less power they have.
  • They also say that you can counter the bill collectors’ tactics with effective strategies and you can feel empowered if you hire a good law firm My Debt Advisors to handle your case. If you work with an appropriate attorney, he can help you take necessary actions to regain future options & possibilities.

 

  1. Filling Forms:
  • Upon Bankruptcy, you need to fill in the Chapter 7 or Chapter 13 forms. The filling of these forms stops foreclosures and repossessions.
  • It also helps you put a stop to any law suit or creditor harassment. Many people are not aware of this benefit connected with form filling.
  • Also once you have filled in these forms and submitted them, you cannot be asked to put a stop to main utilities like your car, house, and other possessions which are needed by you to re-establish yourself and your family. This keeps your family and possessions safe so you can start rebuilding a better and stronger financial future.

 

  1. Tax Discharge:
    • In some cases, the form filling can give you tax debt discharge under Chapter 7 or Chapter 13 bankruptcy filing. However to be fully discharged the following criteria should be met –
      • The tax filing should have been due for filing at least 3 years back,
      • The returns should have been filed at least 2 years before that,
      • The return should not have been fraudulent,
      • The tax payer should not be guilty of tax evasion &
      • The tax debt should not be from an un-filed return.
    • If not possible to completely discharge the tax, it could become more manageable under Chapter 13.

 

  1. Future Credit Possibilities:

Most of the people who go through bankruptcy feel that once they are bankrupt, they cannot go for taking credits after discharge. Your bankruptcy will last for 10 years following the filing. But during this time you will be able to buy a house, get a car on finance, or even get a credit card. So, you are no longer having a debt. You might even get calls from banks offering you credit cards.

Bankruptcy is not the end of the road for an individual. It is possible to start afresh once the issues  that led to the filing have been sorted out, and one no longer has to worry about debt catching up.