Personal Bankruptcy Information

The word bankruptcy is derived from the combination of two Latin words ‘banco’ meaning a table and ?ruptus? meaning ‘broken’, implying the broken state of an entrepreneur?s business. Bankruptcy can be defined as a legally declared inability or incapability of individuals or organizations to pay their creditors.A person can file for personal bankruptcy under chapter 7 of the bankruptcy act. On acceptance of the bankruptcy request, the court mails letters to the creditors about the bankrupt state of that person and the creditors are legally bound to stop demanding repayment. Before filing for bankruptcy, an individual has to take a course that provides information about credit counseling and financial management. They also have to take a ‘means test’ in which their average income is calculated and if it is below the average income of that state, only then can they apply for personal bankruptcy.The ‘Means’ test mentioned above shows how much a debtor can afford to pay towards credit cards and the sum can be calculated by subtracting the living expense from the income of the concerned person. Debtors filing Chapter 7 or Chapter 13 bankruptcy, must present to the trustee, at least seven days before the 341 meeting, a copy of a tax return or transcription of a tax return, for the period for which the return was most recently due.Other documentation that is required at the time of filing bankruptcy includes a list of creditors, details of assets and liabilities, a certificate of credit counseling, proof of income for the last six months, statement of monthly income, tax returns for the previous four years and tax returns during the bankruptcy case. The individuals filing for personal bankruptcy would also need to present copies of recorded mortgages, deeds, and titles to vehicles, copy of automobile financing agreement, creditor mail received from the creditors in the last 90 days, copy of any security agreements with secured creditors, copies of any divorce decree, property settlement agreement, separation agreement and child support order.

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