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Bankruptcy – Chapter 7 Explained

July 8th, 2010

An individual or business can apply for chapter 7 bankruptcy, subject to a means test. However, whilst bankruptcy offers a way out of debt problems, it brings with it problems of its own, therefore sound financial advice should be sought before proceeding.

From a company’s point of view, all business has to take risks to be successful, but sometimes those risks just don’t pay off. It’s what a business does in these times that have a crucial effect on it’s future. If you are considering filing for chapter 7 bankruptcy and want to know how, this article will help to explain.

The rules for chapter 7 bankruptcy are common to both a business and an individual. Chapter 7 is probably the most popular form of bankruptcy, offering as it does a clean slate financially.

The Bankruptcy Abuse Prevention and Consumer Protection Act introduced in 2005, aims to protect creditors, by ensuring that their outstanding debts are repaid as far as possible. The fact is, chapter 7 provides for liquidation of an individual’s or company’s assets, and appropriation of the proceeds to the creditors. Any debts that remain outstanding after all the sale proceeds have been allocated are written off, leaving those to whom money is still owed out of pocket.

Many people and businesses claiming chapter 7 bankruptcy now have to complete a financial means test, bought in under the act, to clearly demonstrate that they cannot afford to repay their debts. This is to ensure that they are not simply taking the easy way out, when they could in fact, complete a 3-5 year repayment plan under a chapter 13 bankruptcy.

Chapter 7 is usually granted if the means test shows insufficient means to clear the debt.

If a chpater 7 bankruptcy goes ahead, the individual or business is then protected by “automatic stay”. This means no creditor may pursue them for repayment by any means. All the assets and personal property are sold and the resulting sum of money distributed amongst the creditors. Any outstanding debt is written off.

When a business has successfully filed under chapter 7, the trustee assumes the running of the business and the management board lose their jobs.

A chapter 7 bankruptcy stays on one’s credit report for 10 years.

There are plenty things to consider when wondering how to claim bankruptcy. However, how to claim bankruptcy is very easy, but ought only be thought of as an absolute last resort. Check here for free reprint licence: Bankruptcy – Chapter 7 Explained.


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Feeling the Financial Squeeze? How to Claim Bankruptcy

May 11th, 2010

Filing for bankruptcy should be a last resort.

The 2005 Bankruptcy Abuse Prevention and Consumer Protection Act brought in legislation making it compulsory for an individual to obtain credit counselling within 180 days of filing for bankruptcy.

By having counselling, an individual is made aware of the alternatives to bankruptcy, which may be suitable in their case.

There are a number of bankruptcy types (called “chapters”), but Chapters 7 and 13 are the most common.

Chapter 7 is often regarded as being the best option. The downside is that most all personal assets have to be sold, including any familly home.

However, after all relevant assets have been liquidated, any outstanding debt (there are exceptions, such as tax), is cancelled, allowing a totally fresh start.

If an individual does not want to be forced to sell all their assets, chapter 13 bankruptcy removes this need altogether, by putting in place a repayment plan, debts being paid in full over a 3 – 5 year period.

Some individuals file for chapter 7, despite having sufficient income to enter into a chapter 13 repayment plan. To ensure that repayment is made when ever possible, the legislation introduced in 2005 requires all applicants for chapter 7 to complete a means test

Not hiring a lawyer is a false economy. You will need help to fill in your details for the BAPCPA’s means test and a lawyer will help decide the most advantageous form of bankruptcy to file under.

Appointing a lawyer instantly triggers what is called “automatic stay” and is a form of protection from creditors in that they can thereafter no longer pursue you directly for payment of debts – they have to deal directly with your lawyer.

Your lawyer will reuire you to make lists of both money you owe, and assets you own, which are later reviewed at a creditor’s meeting at which time the veracity of your financial position is examined and you are recorded answering questions on oath.

In a chapter 7 case, the court decides whether there are assets that can be sold to pay creditors. Once these assets are sold and the money distributed amongst the creditors, any outstanding debts are wiped out.

In a chapter 13 case, a repayment plan is made, paying all creditors in full over 3 to 5 years, based on your actual ability to pay according to the means test.

Under chapter 13, the notice of discharge is served 30-60 days after the repayment plan has been completed and fulfilled. Under chapter 7, creditors can legally challenge the discharge on the 60th day after the meeting of Creditors. If no representations are made, notice of discharge is issued a few days later.

If you are thinking about how to claim bankruptcy, I recommend have a look at www.howtoclaimbankruptcy.net for more free information, including advice on how to restore your credit score after bankruptcy has been completed. Get a totally unique version of this article from our article submission service


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Will A Business Loan Affect My Personal Credit Rating?

April 26th, 2010

When looking to build a business, a large majority of entrepreneurs will need a business loan, and these are a great way to get your business idea off the ground if you don’t have a lump sum sitting around.

There are a few different types of business loan, such as term loans, short term loans and equipment financing, and the type you go for depends on factors such as the amount you need to borrow, when you think you’ll be able to pay it back and what you actually need the money for.

A particular concern that many small business entrepreneurs raise, other than whether they will actually be approved for the loan, is whether applying for a business loan will impact on their own or their partner or spouses personal credit rating. It’s understandable as even though we expect our businesses to do well, there are factors beyond our control and so it is sensible to look after our private affairs well.

One recommended way to ensure your business credit is viewed separately from your personal credit is to make sure your business is registered completely separately. If you make sure your business is registered for its own Tax ID with the IRS, has a separate bank account and is registered at an address other than your home address, it is viewed separately and can begin to build its own credit rating.

For a brand new business the bank or other lender will often take your personal credit into account, as they have no business credit score to use, and so in this case a business loan may affect your personal credit score and can lower it slightly.

In cases of an existing business it is more likely that you will be qualified for a loan by the lender on the basis of the business’ credit rating.

With business loans there is no definitive answer as a range of factors relating to individual cases varies from case to case, but as a guide loans for a new business will usually affect your personal rating, whereas for existing business this is less likely.

If you are looking for the best business debt help then visit The Business Debt Advisor for useful advice forbusinesses in debt.


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Declaring Yourself Bankrupt – Some Facts

April 21st, 2010

We live in an age of easy credit. OK, the banks and financial institutions have caught a cold in recent years making obtaining credit harder to obtain, but for many people a worldwide recession combined with high personal borrowings and credit card debt, has resulted in real financial difficulty.

Credit cards have played a major role in this. We all know how easy it is to live beyond one’s means by supplementing our spending with credit card debt. The problem is that it has to be paid at some stage, and for some, just the monthly interest is more than they can afford.

Some short term relief can be found using balance transfers to cards with lower interst rates, but a long term solution has to be arrived at eventually.

For many, the chance of wiping away this debt and starting again with a clean financial slate is very appealing. Declaring yourself bankrupt can do this, but should only be considered after some serious thought as to whether or not the situation can be saved, and should be only ever be a last resort.

You also need to be wary of the plethora of companies that have appeared in recent months to “assist” with bankruptcy.

The most sensible thing to do, regardless of cost, is to hire a specialist bankruptcy lawyer. Be aware that they should have experience of the bankruptcy laws as they appear in your actual state. A specialist lawyer will be able to advise the best course for you to follow.

Before declaring yourself bankrupt, you need to check that you are eligible. You are ineligible if:

If in the last 180 days you have, of your own accord, dismissed your own bankruptcy case you are ineligible.

If you have previously declared yourself bankrupt and received the discharge within the last seven years you are ineligible.

You are ineligible to file bankruptcy if in the last 180 days you have had a petition dismissed because you failed to follow the Bankruptcy Code.

If none of these points apply to you, declaring yourself bankrupt is open to you.

Your lawyer will advise you of the best type of bankruptcy for you to file under. There are several “chapters” or types of bankruptcy, the most common being chapter 7 and chapter 13.

Chapter 7 bankruptcy is often regarded as the “chapter of choice” as you are no longer responsible for any outstanding debt (there are some exceptions), after your assets have been sold and the proceeds distributed amongst your creditors, giving you a completerly fresh start. Chapter 13 bankruptcy laws allow you to keep your assets and pay off your creditors over 3 – 5 years.

For additiaboutal useful informatiabout about declaring yourself bankrupt, including informatiabout about angles to caboutsider before filing and informatiabout about lawyers, visit www.declaringyourselfbankrupt.net. Get a totally unique version of this article from our article submission service


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Does Liquidation Spell The End For My Business

March 22nd, 2010

If a company is finding it difficult to cope under the weight of outstanding debts or have taken a hit from the economic recession the director/directors may conclude that the best course of action is to close the business. Referred to as a Creditor’s Voluntary Liquidation, it essentially involves the creditors agreeing to liquidate the assets of the business and take a share to reduce their losses.

An insolvency practitioner will be appointed to facilitate the liquidation and make sure the assets of the company are valued at the best price and then sold to the highest bidder. At this point there is nothing to stop a director of the original business starting up a new business and bidding for some or all of the existing assets. Essentially this allows all the directors of the business to found a new company and continue trading without the old company’s debt.

This is an option that can work quite well for some businesses but before considering this option, the directors of a company must be certain that they will avoid allegations of wrongful trading by the liquidator of the original business. If the practices of the directors are called into question they may face legal action and could acquire some of the old company’s debts.

There is no guarantee that when attempting to purchase the assets of a liquidated company that the liquidator won’t sell them to an alternate bidder. In order to avoid this scenario it is possible to agree a ‘pre pack liquidation’ process, also known as ‘Pheonixing’. This involves a predetermined deal with the liquidator before the liquidation process.

This method of liquidation is often considered a quick-fix solution to evade debt it will not be considered by insolvency practitioners unless the business is guaranteed to fail. If a company does fail, the creditors will lose out anyway and the majority of businesses will try and avoid further loss of jobs and trading. This is an ideal solution to a business that is stable but has fallen on hard times due to circumstances outside its control.

If you are looking for the best business liquidation advice then visit The-Business-Debt-Advisor for useful business debt help.


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How Long Does A Member’s Voluntary Liquidation Take?

December 22nd, 2009

Under the Insolvency Act of 1968, one of the liquidation processes that have emerged out in the open is the Members’ Voluntary Liquidation. It signifies the steps for the liquidation of those companies that are solvent, or in other words still have the ability to pay off their debts.

In the general scenario, an insolvent company opts out for liquidation. This inability of debt payment is the prime motivation for liquidation when the assets are sold off for debt payment. Nevertheless, there are exceptions to the rule as well. In other words, there are other cases too where the company does not have to be insolvent in order to be liquidated.

In the case of the member’s lack of will to continue the operations of the company, a VML is a viable option to opt. In addition, losses for a company or indecision regarding its future can also validate VML. Nevertheless, a compulsory liquidation is the complete opposite of a VML. Nevertheless, this applies only to those companies who have enough wealth to pay off their debts that is the company must be solvent, and should pay its debt within one year.

The first step in liquidation is a formal resolution to wind up the company. After having discussed the financial position of the company in a meeting, the resolution is passed. This meeting determines the viability of the liquidation option. In addition, the name of the nominated liquidator is decided upon. A seventy-five percent agreement from members will be the condition on which, this decision can be carried forward.

A formal Declaration of Solvency should be produced before five weeks pass from the date of the resolution. This declaration is proof of the solvency of the company, elucidating all the details about the assets, and liabilities of the company. From this, the company is deemed eligible to pay off the creditors with statutory interest (a nuisance of an opportunity cost) within one year.

Once the legal procedures have been taken care of, the liquidator is to value the assets of the company, either selling them off, or distributing them amongst shareholders, and members. In addition, the appointment of the liquidator nullifies the authority of the directors despite the obligation for their consultation in all matters. This MVA process lasts a duration that is required to finish the aforementioned legal proceedings.

A MVA is beneficial for the shareholders, as they can get back their investment that they made in the business. Either the liquidator will distribute the assets of the business within the shareholders, or he will sell them off, and distribute the cash.

The assurance of the solvency of the company, and its ability to pay off debts should be intact and final. In case of a discovery of a financial instability of the company, the directors are in the danger of facing legal action, and being dragged to court.

Bobby Dazzler is a financial consultant. You can take his advice on members voluntary liquidation and complete information about cva at his recommended website at http://www.beesley.co.uk.


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