Business Law: Bankruptcy

Business Law

November 25, 2014

Bankruptcy

        The legal status of a person or entity that cannot repay the debts it owns to creditors is known as bankruptcy. In most of the cases it is imposed by a court order, often initiated by the debtor. If the person or entity is not able to pay debts, the best way to solve this problem is to set up an arrangement with the creditors. There are two options for the bankrupt person, declares a voluntary petition to become bankrupt or let the creditor take action to have this person declared bankrupt by an order of the court usually known as sequestration order. ("American Bankruptcy Institute.")

        The consequences of bankruptcy are really serious. The person or entity which is declared in bankruptcy will be registered in a permanent record named the National Personal Insolvency Indez (the NPII), which is an electronic register of al personal insolvency proceedings. This site is able for any person and includes personal information such as the name, date of birth and address of the person who is registered. In addition to, during the declaration of bankruptcy a trustee is appointed to look over the situation. The duties of this person are to specify in legislation and this person must have to attach to certain standards while he is on duty. The roughness part of bankruptcy is when the trustee is force to sell all the assets, including that person acquired or become owner during bankruptcy; nonetheless, this person would be able to keep some types of assets. The trustee must recover any income the person earns over a certain limit. He also has to investigate financial affairs and in many situations recovery property that has been transferred to other person prior to the bankruptcy. It is also depicted that during and after bankruptcy, the person or entity is subjected to certain obligations and restrictions.

        The end of bankruptcy come either discharge or annulment. Discharge means that your bankruptcy has ended; meanwhile annulment is effectively the cancellation of a bankruptcy. after a discharge your name will always be as a discharged bankrupt and on credit reporting agencies for 2 years from the date of discharge. On the other hand, annulment has three forms, where the debtor pays the debt in full, including interest, the realizations charge and the trustee´s expenses and fees. The second form is when the creditor accept a composition or arrangement, which is an offer of something less than the payment in full; thirdly applying to a court for an order of annulling your bankruptcy.( "American Bankruptcy Institute.")

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References

"American Bankruptcy Institute." American Bankruptcy Institute. N.p., n.d. Web. 21 Nov. 2014.