Bankruptcy Proceedings Will Take You There
The bankruptcy procedure has been designed such that people who are in serious financial hardships and cannot afford to pay their debts can take advantage of this procedure to lessen the burden of having their creditors holding them accountable for any unpaid debt.
By declaring oneself bankrupt, the person admits to lenders that he or she is not in a financially strong position to pay back any amount he or she may owe the lender or lenders.
Under the laws governing the bankruptcy procedure, certain properties owned by the borrower will be taken over by the bankruptcy court, sold and then the proceeds from the sale used to repay the creditors. Properties that are not covered by this law cannot be confiscated from the borrower.
Since the process makes it clear that the properties taken from the delinquent borrower are supposed to be used to pay the creditors, the borrower is often times allowed to walk away from the debt once he or she has been approved for bankruptcy.
However, an important point to note is that, the borrower would still be held responsible for settling debts such as student loans and a small list of others. This is because; such debts are not covered by the bankruptcy code.
Due to the immense benefits the borrower stand to gain and the potential loss of revenue to lenders, the bankruptcy scheme is closely guarded by a well laid system of rules that has been put in place to ensure that unscrupulous individuals do not abuse the system. A borrower would only be granted access to the scheme after a court sitting has been held between the borrower, the board of trustees and the creditor or creditors (depending on which might be the case). This hearing by the bankruptcy court is usually to ensure that the borrower absolutely deserves the bail out plan offered by the process.
It is also to ensure that lenders are not going to suffer due to a loss in revenue simply because the borrower mismanaged his or her resources. In cases like this, the borrower may still be held responsible for a large part of the unpaid bills if it turns out that the assets to be sold will not sufficiently cater for the amount to be paid out to creditors.
A delinquent borrower who has no choice than to seek to use bankruptcy as the only way to prevent foreclosure will need the expert advice and service of an attorney who is familiar with the bankruptcy process. With the assistance of the attorney, the borrower would be able to go through the process smoothly and successfully. It is always in the interest of the creditor to do all that is possible to prevent a borrower from successfully declaring him or herself bankrupt. That way, the borrower would still be responsible for paying the entire amount owed on the loan including interest.
In such cases, during the first hearing at the bankruptcy court (which is commonly referred to as the First Meeting of Creditors) the lenders will throw questions that will seek to make the borrower ineligible for bankruptcy. An experienced bankruptcy attorney would know how to handle such questions and ensure that the interest of the borrower is protected.
This first meeting usually takes place not later than a month after the borrower has successfully filed the application for bankruptcy. If, after this meeting, there is any creditor who is not convinced and would want to challenge the bankruptcy bid, the borrower can expect to make another appearance at the bankruptcy court. Otherwise, the borrower’s attorney can effectively handle any other sort of negotiations with the creditors.