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How To Decide 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 debtor to compensate for his loss. This scheme not only left the debtor broke but also caused him to serving imprisonment. However, the mechanism has been transformed a good deal over time. In modern times, bankruptcy is generally filed by a lender who acknowledges his inability to pay back his loans. This enables the debtor to easily re-organize his finances and attempt at partially paying off what he owes while continuing his business. The legislation that governs bankruptcy varies from country to country and even from state to state. For instance, in the US follows a Bankruptcy Code according to which there are six different types of bankruptcy known as Chapters while Netherlands abides by the Dutch Bankruptcy Code. Again, Tampa Chapter 7, more commonly termed as straight bankruptcy, and Tampa Chapter 13, also known as Wage Earner Bankruptcy, may have legal implications that are different from the ones followed in other states of the US.

When an individual files for Straight Bankruptcy, he or she needs to give up all properties that are free from taxes and other liabilities. The trustee handling the bankruptcy takes the returns of these assets and divides 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. After 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. Inability to pass this test leads to the rejection of the bankruptcy application and sometimes suggests Wage Earner Bankruptcy to the applicant. It is important to be advised by a competent bankruptcy attorney to find the best way to deal with this situation.

As is evident from the name, Wage Earner Bankruptcy is aimed at those who have a steady flow of income. Under this type, the debtor is required to opt for a repayment plan in which the applicant chooses to pay off his debt with a portion of his income. Depending on factors like income, expenditure, assets, etc., the repayment period can be anything from three to five years. The tenure cannot cross the five years’ cap. In this case too the trustee plays an important role. Debtors pay the trustee who then hands over the money to the creditors involved. Again, in case of the debtor’s failure to make the payment, legal proceedings will act upon the trustee’s motion.

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