Knowing the actual system based on what the law prescribes enables one to make an informed decision, should the need arise. Nonetheless, the proactive stance is, of course, to teach people certain facts to prevent financial distress and avoid court filings.
History
It is believed that bankruptcy laws originated in England around the middle of the sixteenth century, during the reign of Henry VIII. In the past, creditors were permitted to seize the debtor's assets, place the debtor in jail, and force the debtor's family to pay the amount of the debt in order to bail him out of jail. This is currently called involuntary bankruptcy.
Later, bankruptcy by choice was developed. This allowed the debtor to file and the courts to execute judgment regarding creditor claims. As a means of discharging a debtor's financial obligations, voluntary bankruptcy is now acknowledged in the majority of nations, and recent legislation encourages negotiated settlements or debt restructuring.
Categories under legislation
Under U.S. insolvency laws, six categories exist.
Chapter 7 is a liquidation proceeding in which a debtor's non-exempt assets are sold by a trustee. The trustee then redistributes the remaining funds to the creditors.
Chapter 9 is reserved for the reorganization of municipal debt.
Chapter 11 is applicable to corporations and is a form of financial rehabilitation, allowing a business to continue operations while repaying its debts.
Chapter 12: This variety is reserved exclusively for farming and fishing households.
5.Chapter 13 - Chapter 13, also known as Wage Earner Bankruptcy, provides relief for individuals.
Chapter 15 is a section of United States bankruptcy law that governs cross-border or international insolvency cases.
Facts
Prior to declaring yourself insolvent if you are contemplating filing for Chapter 7 or Chapter 13 bankruptcy, there are a number of crucial factors to consider.
Initially, bankruptcy pertains only to unsecured debt. This includes obligations such as credit card debts and unsecured loans. A further factor to consider is that this will remain on your credit report for a number of years. This will restrict your ability to utilize an otherwise accessible line of credit.
Prior to making a decision, it is advisable to seek the assistance of a professional accountant who can advise you on pertinent facts. The right information can make a difference.""
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