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Bankruptcy is a financial situation in which an individual or a corporation is not in a position to pay their debts which can be caused by a list of setbacks. Among the causes of financial distress, as recent research shows, is economic recess which is out of the control of any individual. A financial distress petition can be filed voluntarily or involuntarily.
What most people do not know is that, a group of creditors can come together to file a lawsuit against the debtor. There have been changes in the bankruptcy code that any involved party should familiarize themselves with before they can file a petition. There has been a change on who is eligible to file a financial distress petition. In the past, the debtor would be allowed to choose the chapter under which to file.
However the means test has changed this privilege. The court, through the means test, will determine who is eligible to file a financial distress petition. Another change in the bankruptcy code is in the number of times an individual would be allowed by the court to file. In the past, people who found it hard to pay their debts would be allowed to file multiple petitions. This meant that in case the individual had first filed under chapter 7, they could immediately file under chapter 13.
This is mainly done to save the assets that survived the discharge rule under chapter 7 and have time to pay off the pending debts. This has however changed and the period after which an individual can file increased by two years. Filing a petition is not the end of an individuals financial life. One just needs to be equipped with the facts on how to do it.
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