The problem of bankruptcy has become increasingly common basically due to the problems arising from the recent global economic problems. The down turn of the US economy affected many individuals. They lost their jobs, homes, possessions and many others. This way, they were forced to change their lifestyles and with that, many things were lost. Even credit ratings were negatively affected, with lots of consumers losing out on their positive ratings to negative ones. Basically, an individual or business is declared bankrupt when they become insolvent. This simply means that the person involved or the business is incapable of repaying its debts to creditors.
A person is declared bankrupt if they cannot afford to repay their debts. These could be bank loans, business loans, personal loans, credit card debts, mortgage loans and all other forms of credit. This will not just jeopardize the consumer but will also cause the lender to suffer losses and they may take drastic action to defend themselves against such situations. To defend themselves and get legal protection against any adverse action from the creditors, it is important for such a person or business to be declared bankrupt and seek the protection of the courts.
The law courts in any state are mandated to provide protection to individuals seeking protection due to insolvency. The law of the land protects both the creditor and the debtor in cases where a person is declared bankrupt. In some instances a business may also be declared bankrupt. This basically implies that the particular business is unable to repay any loans or credit advanced by lenders, both individual and business. There are different chapters relating to bankruptcy that protect such people. Chapter 7 is the relevant chapter relating to the protection of individuals while chapter 13 protects businesses that are insolvent.
To successfully file for protection in a court of law, it is advisable to seek the assistance of a professional. It could be an accountant or other professional in the finance industry. This is because sometimes there are better solutions than being declared insolvent or bankrupt. It is much better to ensure that bankruptcy is the only solution. There are other solutions for indebted businesses and individuals and filing for insolvency or being declared bankrupt does have negative consequences. A bankrupt individual cannot receive any form of credit, may not seek public office, may find it hard to get a job and many other serious consequences so it should be sought as a last and final resort.
As soon as the person decides that they need to file for bankruptcy then the next step is to consult a bankruptcy lawyer. This is a legal professional who specializes in working on matters relating to insolvency. They will be able to advice on the best way forward. This includes filing the correct chapter of bankruptcy. Once the filing at the court of law is done, the judge will make a ruling and enable the individual client or business receive the protection that they need. The court will provide a suitable solution that will carter to the needs of both the creditor and the debtor, helping them manage the challenges best as they can.