Bankruptcy

Bankruptcy

Bankruptcy Simulation Summary
According to U.S.courts.gov, for the 12 month period ending June 30, 2006, the total number of businesses which filed chapter 7 was 21,857 versus chapter 11 filings of 5,475, a ratio of 4:1 (2006). Chapter 7 bankruptcy is the liquidation of assets to pay creditors based on the creditor’s level of priority. Whereas, filing for Chapter 11 allows businesses to continue to operate while developing and implementing a plan for repayment of debt to creditors within three to five years. The entire process for filing Chapter 11 bankruptcy can be very timely as the reorganization plan requires approval from creditors and the court. According to the simulation, filing for chapter 11 can take over six months for filing. U.S. courts.gov states “…the debtor may file a plan of reorganization during the first 120-day period after the petition is filed” (2006). Acceptances of the reorganization plan must be obtained within 180 days after the petition date (uscourts.gov, 2006).
Like a business, an individual might be forced to file bankruptcy when they have debts in which they can not afford to pay. Bankruptcy allows individuals either a chance at a fresh start, or an extended period of time to pay creditors while some assets, such as a home or car, are protected from creditors methods of collection as long as payments are still being made. Filing for bankruptcy can substantially ease the financial stress on an individual; however, when filing for Chapter 7 there are certain debts which can not be discharged such as:
1. Taxes or fines due to the US or state or local government agencies;
2. Money due to the fact of an individual getting money under false pretenses or representation (like scams);
3. Money due for willful or malicious injury to an individual or their property;
4. Money due for alimony or child support;
5. Money due for embezzlement or larceny, including funds obtained illegally by someone with fiduciary...