The debt issue is increasing in an alarming rate in the current days and the major factors accelerating the issue are unemployment, lay offs, reduced salary, increasing cost of living etc that has practically brought the citizens of Orange County to financial hardships. Many have felt that they can never repay the debts and have gone to the extent of declaring bankrupt. While some have taken this decision while consulting a bankruptcy attorney, some have decided on their own.
But what is this Bankruptcy all about is a question that many may ask. Bankruptcy in short means surrendering before the law and accepting that one is not able to repay the debts for which suitable and amicable action can be taken by a federal court. To facilitate the debtors to be on the legal path and provide an opportunity to be relieved of debts and enable him for a fresh starter towards financial security this option has been adopted by the government. At the same time it also ensures that the creditors are not harmed and not at a loss. So, one can say that this is a kind of balancing policy between the debtor and the creditor. And the role of giving proper knowledge and guidance in this regard is taken over by bankruptcy attorney.
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When we say Bankruptcy it involves two categories - individuals and organizations. While for individuals there are two types of Bankruptcies and for organizations it is three. But at times the third option given for organizations is applicable for individuals also in exceptional cases.
For individuals there are the Chapter 7 and Chapter 13 bankruptcies. While the Chapter 7 is a kind of harsh and severe one that makes a person loose some or all of his property. The Chapter 13 is a lenient one and is given as an option especially for those who do not qualify for Chapter 7 i.e. they do not have any assets at their disposal to repay the debts. In Chapter 13 when you file for bankruptcy a Bankruptcy Trustee is appointed by the court who will take charge of all your selected assets (those that qualify to be brought under the purview). He will then sell them off and the amount received thereby would be used to repay the debts.
Talking about Chapter 13 it is a kind of relaxation for the debtors and they are given a period of three to five years time during which they can repay the debts on a regular part repayment basis. But the qualifying clause for this type of bankruptcy to be applicable is that the debtor should be having a regular and enough income a part of which he can divert towards the repayment structure. Yet another clause is that the unsecured debts should be within $307,675 and secured debts should be within $922,975.
The third option which is mostly used by organizations is the Chapter 11 Bankruptcy is applicable to individuals when the above said amount clause is not met, to apply under Chapter 13. The main factor underlying the success of this type of Bankruptcy is that a committee of creditors along with the Bankruptcy court has to approve this proposal.
But whatever the case, these are just an overview of the types of bankruptcy and to know in detail and understand which one is the best suitable for your case, you need to consult a bankruptcy attorney who will not only guide to choose the right one but also will handle the various legal procedures and proceedings and get you through with a final decision.
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