What is Bankruptcy?
Though people often use the term bankrupt to imply that someone is broke or poor, bankruptcy is more than simply running out of money, this common usage of bankruptcy is imprecise and bankruptcy describes more than simply running out of money. Bankruptcy is actually a legal term that refers to a legal condition where one has been relieved, either partially or in full, of the obligation to repay certain debts. Bankruptcy is generally initiated by a debtor as a means of escaping obligation for debts, though it can be initiated on behalf of creditors as a way of accessing the debtor’s assets to help repay the debts. In bankruptcy, the debtor’s assets are measured and evaluated, then used to repay a portion of the outstanding debt. In return, the debtor is relieved of further obligations from those debts incurred prior to the bankruptcy proceedings and included in the proceedings. Not all debts must be included in the bankruptcy proceedings and some debts, such as school loans, may be exempt from bankruptcy by federal law. Different countries have different laws with different bankruptcy requirements. Even in a single country, there may be different types of bankruptcy, which can impact the debtor in different ways. In the United States, there are three main types of bankruptcy, which all have different rules and requirements, and impact the debtor in different ways. A Bankruptcy Search will reveal bankruptcies in the United States, but not bankruptcies from abroad.
What are the Different Types of Bankruptcy?
In the United States, there are main types of bankruptcy filings, which are referred to by the chapter in the Bankruptcy Code that governs them. These include: Chapter 7, Chapter 11, and Chapter 13. A Bankruptcy Search will reveal a history of any of these three types of Bankruptcy. Chapter 7 bankruptcy is the most basic form of bankruptcy available to individuals. It is limited so that people cannot use it repeatedly within a short period of time. It involves the appointment of a bankruptcy trustee who cancels many of the debtor’s debts, but can also liquidate assets to repay creditors. Debtors cannot use Chapter 7 if their income and assets indicate an ability to repay their creditors under Chapter 13. Chapter 13 is the more complex of the two personal forms of bankruptcy. Generally, the debtor retains property but is required to adhere to a three-to-five year repayment plan. This is called a reorganization bankruptcy and it is applicable to businesses as well as individuals. Individuals applying for Chapter 13 must complete credit counseling prior to filing for bankruptcy and must prove that they have the income to repay some or all of the debts. There is a secured debt limit and an unsecured debt limit for Chapter 13. The secured debt limit is $1,149,525 and the unsecured debt limit is $383,175. The repayment plan may allow for only partial repayment of some debts, but other debts, known as priority debts, must be repaid in full. Priority debts include child support, alimony, wages, and tax obligations. Chapter 11 is the final form of bankruptcy. Like Chapter 13, Chapter 11 allows businesses to restructure debts and remain in business. In fact, it is the only form of bankruptcy that allows for restructuring and remaining in business is a business is owned by a partnership, corporation, or limited liability corporation. Chapter 11 is also available to individuals with personal debt that exceeds the limits imposed by Chapter 13.
How Does Bankruptcy Impact a Person or Business?
Bankruptcy impacts people and businesses in a variety of different ways. People or businesses applying for bankruptcy may have limited access to their property and may be vulnerable to losses of property through liquidation. Individuals will need to complete credit counseling. Bankrupt individuals or companies will often be considered not credit-worthy and will have a difficult time obtaining credit. These difficulties can range from being unable to obtain credit-cards to being ineligible for refinancing on homes or to get automobile loans. Furthermore, these effects can last for years after a bankruptcy has been declared and may impact people with whom the original debtor enters into relationships, even after the bankruptcy.
What Does Bankruptcy Mean about a Person or a Business?
Some people believe that bankruptcy is a moral issue because it involves, in whole or in part, escaping debts that someone has contractually obligated themselves to pay. That viewpoint may be overly simplistic. Medical bills are a huge driver of personal bankruptcy in the United States. In addition, many people who were negatively impacted by the financial recession found themselves unable to meet financial obligations that they had incurred, despite easily being able to meet those obligations when they became indebted. However, a Bankruptcy Search, may provide insight into whether bankruptcy is a pattern or an isolated occurrence.
Why Would I Run a Bankruptcy Search on an Individual or Business?
In the modern world, individuals allow personal access to finances to a wide variety of peopleAs a result, people run bankruptcy searches for a wide-variety of reasons, either to gain new information or to verify what they have already been told about a person’s background. If the single mom you’ve met on Match.com says she had to file bankruptcy because of her kid’s medical bills, running a Bankruptcy Search can provide details to help you verify that claim. If there are thousands of dollars in medical bills liquidated by the bankruptcy, her story may be substantiated. In contrast, if there are thousands of dollars in luxury store credit-card bills and comparably fewer medical bills, the story may merit further investigation. In contrast, if there are thousands of dollars in luxury store credit-card bills and comparably fewer medical bills, the story may merit further investigation.