The economy has seen a global downturn and the new monetary policy tightening has seen a lot of small and medium sized businesses go bust. Small capital and weak sustaining power has led a lot of these businesses to close down. Loss of income, debts that suddenly turn unmanageable and insurmountable debts has led to the collapse of business. Thousands of jobs have been lost to downsizing and pink slips have become the dreaded word.
Financial insolvency leads to bankruptcy
If you are already into debt and have lost your income generation ability it is time to get in touch with a good bankruptcy attorney and file for chapter 7 bankruptcy. This signifies a situation where a debtor is not in a position to discharge his debts and seeks solvency through the bankruptcy model. The court helps in evaluating the qualification for the same. In a situation where the debtor is found to have six months’ worth of income considerably lower than the minimum wage the family can be declared bankrupt.
This type of bankruptcy needs tactical and strategic consultations with a competent attorney and knowledge of finance is mandatory. This ‘straight ‘or “liquidation” type bankruptcy is sought when there is no recourse from the repayment of the debt. The court sets up a Means test which you are required to pass to qualify. If you do pass the test you are absolved of your debts from your creditors. This cannot be repeated before a period of eight years.
Asset valuation under bankruptcy guidelines
It is possible to smart and protect certain basic assets like their homes, furniture, vehicles, and electronics under the bankruptcy laws if there are exemptions that are available. You need to take a pre-filing bankruptcy course before you can seek the right to file for the same. Once that is done a thorough evaluation is made and a creditor meeting is convened.
This ensures that if there is a chance for the court to award some fair means for the creditor to get back some of their debt they are allowed to do so. It must be kept in mind that some debts like educational loans, alimony, taxes, criminal penalties like driving under influence etc are not absolved in this process.
The statement of financial businesses is an important document
Every person who seeks a bankruptcy is required to file a Statement of financial affairs which is a complete statement of all his income, property, expenses, debts and other mandatory information like the name, address, and social security number. Once this probing petition is filed, the process of granting bankruptcy starts.
Filing for bankruptcy is not an easy task. It is an emotional upheaval as you stand to lose all that you have worked hard for and still keep a clear head to go ahead with the documentation required to file for the bankruptcy.