Bankruptcy: Chapter 7
Federal Laws in the United States of America are compiled in the form of U.S.C. (United States Code. It is a collection of different Titles, each comprising various Chapters. Chapter 7 (Title 11) concerns liquidation issues, as part of the country’s bankruptcy laws. Chapter 7 is a commonly prevailing bankruptcy procedure in the country. It affects varying entities differently.
When a business is majorly in debt and cannot repay its creditors, it may file for bankruptcy in the Federal Court under Chapter 7. However, it is not always a self initiative. There are numerous instances where creditors force the business to commence bankruptcy proceedings.
The next step marks the end of business operations. After this, a Chapter 7 Trustee is appointed. This is followed by selling the assets to repay creditors, that is, liquidation. Sometimes, entire verticals of one organization are sold to another as part of liquidation; hence employees keep their jobs.
Permanent U.S. residents are allowed to file for Chapter 7 bankruptcy. A major distinguishing feature of personal bankruptcy is the freedom to keep exempt property. It prevents certain property from being seized or sold off to repay creditors.
Aside from negative connotations, it is also an opportunity to start afresh. In the process of recovering from bankruptcy, the individual develops an organized way to repay creditors and attempts to give a fresh start to their credit history.
Kinds Of Debt
Bankruptcy may be caused by numerous types of debts or a combination of any of them. These are:
- Credit Card
- Car Payments
- Student Loans
Factors Causing Personal Bankruptcy
Debt does not necessarily imply bankruptcy. There may be various other contributing factors, such as:
- Avoiding Foreclosure
- Unexpected Disaster
- Medical Expenses
- Uncontrolled Spending
- Job Loss
Recovering From Personal Bankruptcy
Renewed Credit Reports
- While recovering from bankruptcy, it is extremely important that discharged debts and closed accounts are properly reported. Agencies offering free credit reports can be used for help.
Timely Bill Payments
- Here’s something you did not know: punctuality in paying bills makes 35% of an individual’s total credit score. Therefore, it is imperative in maintaining creditworthiness. Set up reminders and make it a point to ensure timely payment of bills.
Using New Credit Wisely
- There are various banks out there which help customers in the credit rebuilding process by offering products and services. One good option is to apply for a secured credit card. You can increase credit worthiness by using a small amount of your credit card limit every month.
- In financial terms, “building a shield” involves analyzing the cause of financial crisis and developing measures to mitigate any future threat. First, you must assess the reasons why you filed for bankruptcy in the first place. Follow this by a change in your spending habits. A number of people choose to set up emergency savings funds as a defensive measure.