Two Methods Of Filing Bankruptcy
Oswald H.Seifert
There are two ways a person can become a bankrupt. The first
and more common way is to have the person file a petition to
voluntarily go bankrupt. The second, and rarely used way, is
for creditors to ask the Court to make an Order that a person
is bankrupt. In both these cases a Bankruptcy Trustee is
required to administer the bankruptcy. (see Filing Bankruptcy)
The two main types of bankruptcies available to individuals
deal with different debt situations in different ways. The
typical Chapter 7 debtor has few assets and considerable debts
primarily associated with credit cards, store purchases,
hospital bills and other dischargeable debts. Creditors are
paid, if at all, from anything that the debtor currently owns
that cannot be claimed as exempt. Certain debts are not
dischargeable in a Chapter 7 proceeding but are dischargeable
in a Chapter 13. Dischargeable means that by filing for
bankruptcy you will not have to pay the debt if the court
grants the discharge.
Typical Bankruptcy Filings
The typical Chapter 13 debtor files because the debtor is in
arrears with rent, mortgage payments, car loan or other secured
debt, because the debtor has substantial debts which cannot be
discharged in a Chapter 7 bankruptcy, or because the debtor has
some assets which he or she wants to keep but cannot be claimed
as exempt. Another reason to file a Chapter 13 is to protect
someone else who may be liable for your debts, such as a
co-signer or spouse. In Chapter 13, creditors are paid out of
the debtor's future earnings and a plan must be proposed to pay
these creditors. In order to qualify for a Chapter 13 bankruptcy
the debtor must be an individual with regular income. This
regular income may consist of wages, commissions, rents, public
benefits, social security, unemployment compensation, alimony,
child support, pensions or other types of income which can be
estimated.
Many state courts, including those in Illinois, have ruled that
IRA accounts are safe from creditors in a bankruptcy. But
bankruptcy professor Charles Tabb at the University of Illinois
College of Law in Champaign notes that assets in a Roth IRA may
not be protected. A Roth IRA does not have all the
characteristics of the traditional IRA, since there are no
restrictions on withdrawal of contributions. So that's still an
open issue.
Deciding which type of bankruptcy to file, and what is
protected are but a few of the issues that arise during a
bankruptcy.
Guidelines for Filing Bankruptcy
Your bankruptcy petition must include a detailed list of your
current sources of income and regular expenses as they will be
after you have filed your petition. This is very important. If
the judge assigned to your case decides that your budget
reflects that you can repay your creditors without difficulty,
the judge may dismiss your case. In a Chapter 13 bankruptcy,
the amount that you will have to pay your creditors monthly is
based upon the budget you supply to the court.
About The Author: Will Filing Bankruptcy Affect Your Family?
More info at
http://FilingBankruptcy.eask.info
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