Bankruptcy Law is a legal procedure through which entities or individuals who can’t pay their debts to lenders can seek relief by means of a federal bankruptcy court. In almost all jurisdictions, bankruptcy is enforced by a federal court order, usually initiated by the filer. Once filed, it remains in effect until it is discharged by the bankruptcy court. Bankruptcy Law is quite complicated and often difficult for the average individual to understand. So an experienced bankruptcy attorney should be consulted to provide necessary legal assistance.
The average wage earner is likely to be living paycheck to paycheck and thus unable to personally afford the high costs of hiring a bankruptcy attorney. The situation is further compounded by the fact that many of these individuals probably have very little personal experience with legal affairs. This is where having a bankruptcy attorney on retainer becomes very useful. Bankruptcy attorneys can step in and help an individual understand the implications of filing for bankruptcy, while they represent him or her in court. Most bankruptcy attorneys are also capable of acting as a CPA (certified public accountant) for those filing for bankruptcy.
One major issue that arises in any bankruptcy proceeding is the question of what one’s status will be after filing. As per Bankruptcy Law, there are two classifications of individuals that can be declared “in bankruptcy” namely: exempt and non-exempt. Non-exempt persons are required to file taxes and report their income on their return forms; whereas exempt individuals are not required to file income tax returns. There are certain types of filers who can qualify under both categories.
Non-exempt persons can file a petition for chapter discharge either by themselves or through their lawyers. Bankruptcy Law allows them to recover certain property owned by them, including bank accounts, brokerage accounts, stock certificates and bond certificates. This property belongs to the creditors and is protected by Federal and state laws. However, chapter discharge does not allow debtors to transfer any property belonging to them to their lawyers. The filing process of chapter discharge is handled by lawyers.
Federal Court cannot hear bankruptcy proceedings. Thus, all creditors are directed to send their claims to the bankruptcy court. The bankruptcy court will then determine if the debtor can pay off his debts within a specified time period. If the bankruptcy debtor fails to comply with the terms set forth in the bankruptcy reorganization plan, he or she will be declared bankrupt. Federal Court is the only court that can declare a debtor as bankrupt.
Bankruptcy Law enables debtors to pay back their debts by liquidating their assets. Although the creditor still has the original loans, the court orders the debtor to pay it off. After the bankruptcy cases, the debts become unsecured and non-recourse, meaning, the creditor can collect from the debtor once the money is gone. In some cases, the payment ordered is only 50% of the originally owed amount.