With the amount of debt that the average American acquires, bankruptcy is in the cards for many. Here are some common queries and their answers.
What government branch oversees bankruptcy in the US?
There is a branch within the Department of Justice called the US Trustee Program which oversees it.
Who can file for bankruptcy?
It depends on the country. In the United States, individuals, corporations, or partnerships may file. In the UK, partnerships are not permitted to do so.
Will creditors continue to contact me concerning my debt?
A court appointed trustee will meet with the involved parties and review finances and assets. Debt that is outstanding will be managed by a new payment plan or debt forgiveness. In either case, as much debt will be repaid as possible.
Once a bankruptcy is filed, creditors are required by law to cease any attempts to collect what they are owed. Hence, they are not allowed to take legal actions, or make harassing phone calls, etc. The only exception to this is in the cases of secured debts, wherein the debtors are allowed to continue to try to collect on either the debt or the collateral used to secure it. E.g., a car loan, wherein the lender can still repossess the car or seek the remaining payments.
Why would someone file for it?
If someone is overwhelmed with debt, unemployed, or otherwise unable to bring himself to financial stability through his own means, then he files for bankruptcy. Companies often do so, if there is a great deficit after investing. Sometimes a far lower amount of return comes from the business than anticipated, and filing for bankruptcy is one way to start over.
Will filing for bankruptcy show up on my credit report?
Absolutely! It is a matter of public record. Information about bankruptcy is reported to major credit bureaus and can remain on the filer's credit history for up to 6 or 7 years. If you are seeking a new line of credit, it is possible if you find a willing lender.
Will it affect my spouse?
That depends on whether or not the debts are shared. If there are loans with both names, or if there is a property to be sold with both names on the deed, then bankruptcy will include both people. If debts are separate, it is possible that it will not affect the spouse.
How do you file for it?
The first step is to decide what type of bankruptcy you will file. You may need to file a Chapter 7 or a Chapter 13 bankruptcy. A Chapter 7 type includes the liquidation or sale of all the assets and allows for a fresh start. If you are unemployed, and have a significant lack of finances, you will probably file a Chapter 7. A Chapter 13 type is for those who have a regular income, and would like the opportunity to eventually pay off their debts with better terms of interest.
The next step is to find an experienced bankruptcy lawyer. This is a legal process and you will need professional legal advice. It is also a good idea to do your own research prior to your meeting with a trusted lawyer.
Once your case is in the hands of professionals, the slow process will begin and you will probably have several meetings with lawyers and creditors to sort it out.