Common Bankruptcy Questions

What are the different types of bankruptcy listed under the United Sates bankruptcy code? In terms of personal liquidation, both Chapter 7 and Chapter 13 bankruptcy plans offer individual debtors opportunities to remediate problems with creditors. Businesses which want to continue operating but which need to deal with unsecured and secured debts may opt for Chapter 11 bankruptcy rehabilitation. In cases which involve international companies or extra national financial arrangements, Chapter 15 bankruptcy can be arranged. If cities (e.g. Orange County, California) need to default on major loans, they can file what's known as Chapter 9 bankruptcy. Finally, if farmers or fishers become insolvent, they can apply for Chapter 12 bankruptcy.

Who controls the estate of the debtor? The courts usually assign an impartial entity known as the trustee to oversee the disposition of estate assets to lenders. The trustee is ostensibly an advocate for the creditors, but he or she is also dispensed to provide counseling to the debtor. Moreover, the trustee must help wrangle the various creditors and to ensure the legal and orderly dispensing of moneys.

What debts get discharged during bankruptcy? The answer here depends on state laws, the type of bankruptcy filed for, and case precedents. Taxes owed, child support payments, and student loans, among many obligations, must be paid typically, regardless of bankruptcy filing. That said, unsecured notes, debts, and loans may be forgiven -- as a result, the filing for bankruptcy can be a savvy strategic decision for individuals or businesses under pressure.

Should you file for a bankruptcy or organize a less drastic debt remediation plan? Your accountant and lawyer can help you weigh out the pros and cons of bankruptcy filing. On the positive side, you will discharge lots of your debt, eliminate haggling with creditors, and create a clean slate.

You will also expend fewer time and business resources managing debt and thus be able to work on re-growing your income and asset streams. On the "con" side, however, you will have to deal with a deflated credit rating, higher interest rates, and long-term debts not discharged under your bankruptcy agreement.