Whether you are looking into filing for bankruptcy or have already filed for bankruptcy, you should know what happens after the filing. It is important to understand what bankruptcy actually is, because filing is a major step in the process of financial recovery. If you understand what happens after the filing, you'll be in a much better position to make a plan to stay on track and avoid filing for bankruptcy again.
Chapter 7 bankruptcy
Whether you are looking to get out of debt or simply need a fresh start, Chapter 7 bankruptcy actually happens in bankruptcies. The debtor has the opportunity to wipe out much or all of their unsecured debt, which can make it easier to catch up on mortgages or meet other court-ordered obligations. However, Chapter 7 bankruptcy is not for everyone.
In fact, filing a Chapter 7 petition can have a negative impact on your credit score. The Bankruptcy Code requires you to pass a "means test" based on your current monthly income and expenses. If your income is below the average in your state, you may be presumed to be abusing the system.
The Bankruptcy Code also requires that you take a credit counseling class to learn about your options. Once you have filed your petition, the bankruptcy court will assign you a bankruptcy trustee. This person will collect your nonexempt assets and use the proceeds to pay your creditors.
During the bankruptcy process, you will keep most of your possessions, although you may have to sell certain assets to settle secured loans. You may also lose certain property, such as priceless family heirlooms.
To qualify for Chapter 7, you must pass a "means test" determining your current income and expenses. The means test also examines your assets.
Tax debts can be discharged in bankruptcy
Whether you are filing for bankruptcy protection or simply looking for ways to save money, you may have wondered whether tax debts can be discharged in bankruptcy. You may be surprised to learn that a lot of tax debts cannot be eliminated in bankruptcy. In fact, tax debts are considered a non-dischargeable priority debt.
Among the most common tax debts that cannot be discharged are sales taxes, trust fund taxes, and recent property taxes. However, there are a few types of taxes that are dischargeable.
Tax debts can be discharged in bankruptcy under certain conditions. For instance, if you filed your taxes within a certain amount of time before filing bankruptcy, you may be eligible for a discharge. The IRS may also offer you an installment plan that can help you pay off your tax debt.
Another option is an offer in compromise. An offer in compromise is a deal between you and the IRS in which you pay a reduced amount of money. The IRS usually will not accept this offer, however. You must pay a small fee, and you may be required to pay interest on your balance.
Before you file for bankruptcy, you should also consult a bankruptcy attorney for information about filing a tax lien. A lien is a legal claim against property that can be placed on your property by a taxing authority. In many cases, a tax lien can be placed on your bank accounts, real estate, and personal possessions. You may be able to sell your property and pay off the lien. In Harrisburg, PA, a bankruptcy attorney is equally important to work through all the confusing details of filing a bankruptcy.
Chapter 11 bankruptcy
Typically, a Chapter 11 bankruptcy involves the filing of a plan of reorganization by a business or a corporation. This plan is a compromise between the major stakeholders of the business. It is designed to keep the business going and pay off creditors over time.
Before the court can confirm a plan, it must meet certain requirements. For example, the plan must account for at least two-thirds of the debts owed. It must also be accepted by a majority of creditors. It must also include a plan for paying back non-dischargeable debts.
In the initial debtor interview, the debtor is asked about his or her business plans, and must answer questions regarding reporting requirements. The interview also provides an assessment of the debtor's viability. It may be necessary to seek court approval to hire a lawyer. The bankruptcy process can be long and complicated.
Chapter 11 bankruptcy has been used to help many businesses survive in today's volatile economy. Small business owners are required to provide monthly financial reports to the court. They may also have to seek court permission to sell their assets. The sale proceeds are then distributed to creditors.
Small business owners must also seek court permission to enter into rental contracts and hire lawyers. They may also have to increase withholding to meet their financial obligations.