It is common for people to make mistakes and end up losing their jobs. Many times people take more loans when their credit rating is high and spend all the money only to find that their income has stopped and they have run into a huge debt trap. This is where the government laws come to be of help.
Under the provisions of the Federal Law, any individual or an organization can claim bankruptcy, thereby they get relief from having to pay and clear their outstanding liabilities. But it is not easy to declare yourself bankrupt without following the correct process as prescribed by the law.
Until recently the laws were very simple and allowed you to declare bankruptcy when you did not have an income or a job but had significant debt outstanding, which could not be serviced. The government then could right off all outstanding from you and give your relief from debt. After a couple years you could once again start your own business or take up a job and resume normal life.
As expected, many people started using the law available to declare themselves bankrupt and evade paying the banks and loan outstanding until finally the Rule had to be amended by the Government and ensure that only genuine cases could be admitted for legal relief under bankruptcy. Since then things have been working differently.
Inspection and detailed assessment of the personal assets and liabilities is carried out by an independent team when an individual files for bankruptcy. Based on their recommendation the category and type of bankruptcy application is entertained.
Under the provisions of bankruptcy there are several chapters. Most of the cases fall between chapters 7 to 13 with businesses falling under Chapter 11. Only once the right chapter is determined are you allowed to file your papers and the rest of the process begins.
The provisions contained in different chapters describe the conditions and terms applicable for different cases of bankruptcy which may not be clear to the common man, unless and until interpreted or guided by the lawyers who specialize in bankruptcy. Whatever be the chapter, you can not hope to get a hundred percent waiver and discharge of all your debts.
One would have to pay a part of the debt outstanding or draw up a longer repayment plan. Bankruptcy status gets reflected in your records everywhere and will effect your credit rating for a long time making it difficult to get more loans or credit cards because you are deemed credit unworthy.
Therefore bankruptcy is not an easy thing to do and not for everyone. There is social stigma attached to it too. Unless you really do not have any other option left, it is advisable not to consider filing for bankruptcy, rather talk to the banks and restructure your loan out standings.