Bankruptcy is not something that many people give a great deal of thought too, until something goes drastically wrong and they begin to consider bankruptcy in Palm Desert as an option.
What constitutes bankruptcy?
Bankruptcy is a process that takes place in federal court, the process is supposed to assist individuals and businesses repay their incurred debt under court protection, Chapter 13, or to eliminate debt in its entirety, Chapter 7. The moment you file for bankruptcy in Palm Desert, an automatic stay becomes effective, this stay stops your creditors and third party debt collectors pursuing legal action to recover the debt owed them.
The two types of bankruptcies are known as liquidation and reorganization. Liquidation is chapter 7, this law requires that all your assets, bar a few, are sold and the money be applied to paying your creditors. Reorganization allows you to pay your creditors over a period of time; this is known as Chapter 13.
Reorganization bankruptcies:
Although there are Chapters 11, 12 and 13, Chapter 13 is the bankruptcy Palm Desert most often used by individuals. This type of bankruptcy demands that a repayment plan be proposed to the court. Some debt must be paid in full, other debt can be repaid as a percentage and some debt is not paid. The proposal must be such that the plan is completed in three to five years.
There is some debt that cannot be forgiven:
* Child support
* Debts incurred in a tort case resulting in death or injury while *
* driving intoxicated
* Student loans
* Tax debt
* Fines and criminal restitution
The court will restrict how much money you will have to spend. The court, in many cases, garnishes your wages and pays this amount to the creditors in accordance with the approved plan.
Liquidation bankruptcy:
When you choose Chapter 7 liquidation bankruptcy, your assets are turned over to a court administrator who disposes of them, turning them into cash. The cash is then used to pay all or part of your debt. Regardless of whether all the debt was satisfied or not, you are discharged from any further responsibility. Your credit record will show the bankruptcy for up to 10 years and you probably will be denied credit for this period of time.
In 2005 the bankruptcy laws were amended and to claim Chapter 7 bankruptcy in Palm Desert you have to be subjected to a means test. If your income is above the threshold set in the state for a family such as the applicant, it may be denied.
Preventing bankruptcy:
Most bankruptcies can be avoided by following a very prudent spending pattern. Most debt is caused by impulse buying; don’t use your credit card unless you are in a position to pay it off completely. Do not buy more house or car than you can afford and make sure you are well insured and stay away from investments that are high-risk, even though the promise of high yield is there.
