There are several distinct stages involved in filing for bankruptcy. Approximately six months prior to filing for bankruptcy, applicants are required to endure credit counseling. The applicants must also complete out forms and list all of their assets. The second stage in declaring bankruptcy is to determine the chapter. According to policy, the federal organization determines whether the applicant may choose chapter 7 or 13. Next, means including income and expenditures are evaluated.
Individual property that does not qualify for an exemption is liquidated and distributed equally among the claimants. The corporate entity's assets or possessions are entrusted to a 'trustee' who liquidates them and distributes the money to all the creditors. Payments are also made to the corporation's investors. The corporation is currently insolvent and out of business. Consequently, its normal operations cannot be conducted.
Creditors are divided into the secured and unsecured categories in terms of bankruptcy filing procedures for corporations. The former consists of institutions with valid mortgage claims, which are always given payment priority.
These creditors rank second in terms of priority and have assumed greater risks than secured creditors. However, the final claim belongs to the third category of investors (stockholders). They are only guaranteed payment if the first two investors have been paid.
The fees associated with declaring bankruptcy differ with each step. Typically, counseling is provided for free or up to fifty dollars. They offer a no-cost means test. Additionally, a nominal fee is levied for the release ticket, but court and attorney expenses and fees may total several thousand dollars. Generally, chapter 7 bankruptcy filings are more costly and upfront.
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