Bankruptcy presents a chance to become debt-free and prevent legal actions by creditors. Consumers who are facing foreclosure or repossession choose bankruptcy to avoid the loss of their assets. Qualifying for a chapter is determined by a means test, and the court must approve the case before the claimant receives any benefits of bankruptcy.
Claimants who are unfamiliar with the cases read more about what happens after they’ve filed for bankruptcy.
The Automatic Stay
The automatic stay provides protection for consumers and businesses that file for bankruptcy. Once the case is approved, the automatic stay prevents creditors from starting any legal claims against the claimant. Foreclosure proceedings are stopped once the automatic stay begins. With chapter 7, the automatic stay lasts up to six months, and with chapter 13, the automatic stay could last up to five years.
The Meeting of Creditors
During the meeting of creditors, all creditors have the right to reject or approve the inclusion of their account into the bankruptcy claim. A judge can override the creditor’s decision if there aren’t any just reasons for denying inclusion. All creditors listed in the bankruptcy claim have the legal right to attend the meeting. Claimants who want more information about the meeting of creditors visit lawjur.com now.
Starting the Bankruptcy
The type of bankruptcy case defines what happens during the case. In chapter 7, the liquidation process starts. A trustee is assigned to the case to oversee the sale of the claimant’s assets. The trustee starts all sales and has the option to use auction, direct sales, or offer the assets to investors. All proceeds collected from the sale of the assets are distributed among the creditors. Any exempted values are given to the claimant. The cases last up to six months.
In chapter 13, the claimant starts a repayment plan that requires them to provide a monthly payment that is divided among the creditors. The claimant must use all disposable income to pay off any debts that were not included in the bankruptcy case. Chapter 13 lasts between three and five years. If the claimant fails to pay their monthly payments, the court could discharge the claim, and the claimant is responsible immediately for all outstanding debts.
What Happens to the Claimant’s Credit?
The bankruptcy remains on the claimant’s credit history for up to ten years. Even if all debts are paid in full, the bankruptcy itself remains on all three credit histories and could affect the claimant’s credit rating. Consumers and businesses could face difficulties in acquiring a new line of credit with a bankruptcy on their credit history.
How Bankruptcy Affects Employment
Since the bankruptcy stays on the credit history for years, the claimant could face difficulties for any job that requires a credit assessment. Employers who require a higher than average credit rating can deny employment based on a financial risk to their company.
A Serious Blow to A Company’s Reputation
Bankruptcy filings become public records, and anyone can find them. Once a report of bankruptcy hits the media, it presents serious blowback for the company. An inability to manage finances properly could create a negative image of the company in the public eye.
Bankruptcy offers assistance for consumers and businesses facing dire financial situations. An automatic stay protects the claimant against legal action by creditors. All claimants are required to attend credit-counseling programs before starting their claim. Once approved, the court requires the claimant to follow the full requirements of their selected chapter.