Bankruptcy - Can Ruins Your Credit Rating Article

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Bankruptcy - Can Ruins Your Credit Rating

Bankruptcy, in simple language means insolvency i.e. a person is no longer in a position to repay his debts. Such a situation arises when liabilities exceed assets and therefore you have no assets to repay your debts.

Author: James Arther

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It is a very unfortunate situation and can happen even to seasoned businessman or to a new entrepreneur. To avoid falling into such a trap one should ensure to keep his or her financial health in a very good state. Filing bankruptcy is not an easy job and one has to go through a very complex process involving lot of complex court procedure. Also it affects badly your financial rating for securing loans, which you may need for business development or for your personal requirements at any future stage of your life.

The debtor has to file the bankruptcy report in the court to stop further payment of interest on the borrowings on account of his inability to repay with declaration that his income is not going to improve in the near future as well. This requires furnishing causes of bankruptcy viz. losses in business, family dispute, job loss, poor health or illness, heavy expanses on treatment, natural calamity resulting in damage to assets or business etc.

In US Bankruptcy is dealt under uniform federal laws and fall under chapter 7, 9, 11, 12, 13 of bankruptcy code. Chapter 7 applies to debtor with no assets to repay, chapter9 applies to govt. municipalities, chapter-11 applies to owner or shareholders of companies, chapter12, to farmers and fishermen, chapter.13, to self employed and salaried individuals or family.

New York Bankruptcy cases in general fall under chapter7 and 13.The cases under chapter 11 have declined to almost negligible. Under chapter7, a person with income below average (fixed by court) is absolved from repaying his loan liability; Cases not falling under chapter 7 are therefore dealt under chapter 13. Under chapter13 if you have a regular monthly income and earn much above the average income as fixed under law (the last six months income is taken into consideration) are dealt separately with repayment options by extending their loan terms, revising monthly installments, reducing interest rates or by reducing liability limit after taking into consideration his earning capacity.

California bankruptcy law discourages filing bankruptcy cases in general. Most of the cases are dealt under chapter 13 and thus reducing cases filed under chapter 7 in order to minimize bankruptcy abuse as much as possible. In fact, one has to clearly declare that he has no resources to repay his debt. However, various exemptions are available as per law.

Las Vegas bankruptcy laws normally discourage filing cases under chapter7 which in real term mean one is totally without any asset and truly insolvent. The law encourages people to seek credit counseling and advises in general to file cases under chapter13 so that they could go for repayment of debt for at least up to next five years instead of writing off the full amount as under chapter 7.

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