Understanding Bankruptcy Procedure

The bankruptcy procedure often starts with a bankruptcy petition that is raised by the debtor or creditor.

For debts that is huge, a combined petition can be raised. In filing the petition, the creditor must provide the proof that the debtor is not able to make repayments in order to get the petition into force.

The judge or the court will decide if the petition is to be proceeded or not. If the bankruptcy is cleared to be declared, then the court will have to appoint an Official Receiver who takes the role of controlling the debtor’s property.

The debtor has to submit the Official Receiver within 21 days of the making of a bankruptcy order the statement of affairs. Based on that, the official will call for a meeting with both the debtor and the creditor. The trustee will take control of the debtor’s property and will decide which property will be sold to repay the loans and the debtor will be given only the required essentials to assist in their trade and living. Possessions that are not exempted will be sold for cash.

The official in charge of the debtor’s properties will have to sell the properties, so that the money can be used to be paid to the creditors or clearing the bankrupt’s debts.

A secured creditor does not depend on the trustee for the repayment of the debts that are due to them. After the sale of the debtor’s property if that amount is not enough to clear the secure loan, these secured loan will be first in line when it comes to claiming via unsecured loan. But if the sale exceed than the sum owed then the creditors need to pay that excess to the trustee so that is can be distributed equally among the other creditors. So who is this official appointed by the court? He is the Trustee. The Trustee is a special officer appointed by the court. The Trustee is also known as the bankruptcy administrator as he holds power to process the entire case of bankruptcy and repayment.

All debtors who files for bankruptcy must go for credit counselling course. Do ensure that you attend the course from the court appointed one. They will tell you about the repayment plans and other procedures that involves in the bankruptcy. One should be updated with the bankruptcy laws and the fees that is present for each chapter of the bankruptcy.

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