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What Is Bankruptcy?

by | Aug 25, 2014 | Lawyers and Law Firms

When a person makes a legal declaration that either he or his business is able to pay the outstanding debts they have become bankrupt. Depending on which Chapter is filed for the individual will meet with a judge, the results will be either a discharge of all or at least most of the debt or to determine a repayment schedule. A business can also declare bankruptcy, the business will both close and cease to exist or the business will continue trading but with reduced payments to satisfy the debtors.

Individual bankruptcy in Lake Forest for an individual or a married couple comes in three types which are called “Chapters.” The most common form of bankruptcy for this group of people is Chapter 7, Chapter 12 is only available to farmers and fishermen and Chapter 13, although available to individuals and couples, is rarely used.

For a business the common forms of bankruptcy in Lake Forest are Chapters 7 and 11, if the business also has international debt they can file for Chapter 15.

Chapter 7 is by far the most commonly used form of declaring bankruptcy for both individuals and businesses. Chapter 7 allows the entity to start over with a clean slate; almost all or all debts are discharged. In the case of a business, it ceases to exist; in the case of an individual the court declares that the person can no longer service the debt and the debts become void although certain debt such as student loans are not included, they must be paid.

In the case of Chapter 7 the filer stands to lose almost all assets other than the primary residence and vehicle unless the house or car is covered by a lien which is not being serviced, in this case the house and car are also disposed of in an effort to repay the debtors as much as possible. When filing for Chapter 7 the bankrupt must declare all assets which are then liquidated to pay the debtors. The majority of people who do file for Chapter 7 have very little in the way assets so they actually have very little to lose.

Chapter 13 allows the individual to restructure their debt; this type of bankruptcy is used by those with substantial assets that they do not wish to lose. With Chapter 13 bankruptcy in Lake Forest the debt can be restructured and paid over an agreed upon period of time. In the case of a business, Chapter 11 is somewhat like Chapter 13 as it allows the business to restructure and continue trading.

If you are an individual or a business and you are contemplating filing for bankruptcy in Lake Forest you will need to hire a seasoned law firm to represent your interests. You are invited to contact Chicago Debt Solutions by the Law offices of Trepeck Law Group, LLC. You can follow them on Google+.

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