Bankruptcy is a legal process which would of course follow the bankruptcy law. So before you file for bankruptcy, it is better to know things regarding the bankruptcy law.
1. Bankruptcy laws are federal laws.
Bankruptcy laws are brought into federal courts since they are considered as federal laws. This also means that the law is the same in every place in America. While these courts may be located in multiple different states, they are still federal courts, not state courts.
2. You will petition in a bankruptcy court.
Filing for bankruptcy is a legal process and will need to undergo court procedures which will determine whether or not your debt will be dismissed. When you petition for bankruptcy, you will need to face a judge inside a court.
3. Chapter 11 is for businesses only.
Chapter 7 and Chapter 13 are the most common types of bankruptcy. Chapter 11 on the other hand is another type which is only available for businesses. The business will simply be restructured after they file for bankruptcy.
4. Not all debts are dismissed by the bankruptcy.
Though bankruptcy can dismiss most debts, there are still certain debts which it does not cover. Some of these include special debts like student loans. There are also other debts like alimony, child support, criminal fines and certain taxes.
5. Creditors can force you into involuntary bankruptcy.
When your debt is extremely high, your creditors can file for petition to the bankruptcy court to declare you bankrupt. If the judge does so, he may put you on a court mandated payment plan. This doesn’t always happen and only happens occasionally since debtors usually voluntarily file for bankruptcy themselves.
6. It is possible for you to keep your house.
The bankruptcy court will have a trustee check your assets to see whether or not they can liquidate them in order to pay back your debt. However, it is possible for them to exempt your house no matter what type of bankruptcy you declare. Your house generally can’t be worth more than a certain amount in order for it to be eligible for the exemption.
7. Bankruptcy can affect your credit rating.
One of the negative effects of filing for bankruptcy is getting a bad credit rating after. Since filing for bankruptcy means that you are unable to pay for your debt, most creditors wouldn’t want a client who has the same problem. Though it may be difficult to rebuild your credit, it’s not impossible.
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