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Deciding On The Type Of Insolvency Case You Need To File

Insolvency, in its nascent stage, was devised for the benefit of lenders. This gave power to the creditor to seize all the assets of the borrower to compensate for his loss. This method not only left the borrower broke but also caused him to serving imprisonment. However, the system has been transformed a good deal over time. In modern times, bankruptcy is normally filed by a lender who acknowledges his inability to pay back his loans. This helps the debtor to conveniently 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 and even from state to state. For example, in the US adheres to a Bankruptcy Code based on which there are six different types of bankruptcy known as 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 legal implications that are different from those followed in other states of the US.

When a person files for Straight Bankruptcy, he or she needs to give up all properties that are free from taxes and other liabilities. The trustee managing the bankruptcy takes the returns of these assets and divides it among the creditors. In this way the debtor is relieved of a portion 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 just 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 an efficient bankruptcy attorney for finding the best way to deal with this situation.

As the name suggests, Wage Earner Bankruptcy is aimed at those who have a steady flow of earnings. Under this type, the debtor is required to go for a repayment plan wherein the applicant chooses to repay his debt with part of his income. Depending on factors like income, expense, assets, etc., the repayment period can be anything between three years and five years. The tenure cannot cross the five years’ cap. In this case too the trustee plays an important 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 important to hire a bankruptcy lawyer or attorney who possesses the necessary expertise and potential to handle your case. It is also essential that you maintain great 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.