For the common folk, they don’t have huge sums of money lying around at will so they certainly won’t be able to pay for huge down payments immediately. The problem in buying expensive items such as a car or a house is that most people will almost, always have to get a loan just to pay for them. They will then spend the next couple of years paying off the loan but at least they get to enjoy the item immediately. Unfortunately, when things go awry, people lose the ability to pay off their loans and debts and when coupled with other responsibilities and debts, they end up being unable to pay them off. This is the time when people often file for bankruptcy.
What is Bankruptcy?
Bankruptcy is a legal status wherein the person or debtor is incapable of paying off their debts to their creditors. There are generally two types of bankruptcy; a Chapter 7 bankruptcy which requires for liquidation of all assets to pay off the loan and a Chapter 13 bankruptcy where in the payment plan is restructured so as to give the debtor time to pay off their debts. Both types of bankruptcy have their advantages and disadvantages. Either way, if you are to file for bankruptcy, you will have to have a bankruptcy trustee.
What the Trustee Does
When you file for bankruptcy, you will be given a bankruptcy trustee and is appointed by the creditors or by the Department of Justice. A trustee’s role is to be the person or entity in charge of administering the entire bankruptcy petition. When you file for a petition, every document you send must go through the trustee as well as other extraneous paperwork’s such as income stubs and pay slips. In essence, they are the ones that will handle the small details as well as examine and review the entire petition.
In a Chapter 7 Bankruptcy
Since the two kinds of bankruptcy cases are different, the trustee’s role in either of the two is also different. If you were to file for a chapter 7, then the trustee will be in charge of selling all of your nonexempt assets. Exempt assets vary depending on the state but anything above and over this will be sold. The money will then be used to pay your creditors. If the amount sold is still less than the amount you owe the creditors, then the remaining will be waived. The task for determining whether you have nonexempt assets will also fall under the trustee and it is in their discretion on what items to liquidate.
In a Chapter 13 Bankruptcy
Chapter 13 bankruptcy is the restructuring of your current debt. This means that you will still have to pay your debtors in full but you will be able to keep you property and assets. The trustee, in this case, will help you devise a payment plan that is fair for both party involved. You will give the trustee the money per month and it is their responsibility to portion it to your debtors.
It may seem that the trustee typically works against you but in essence, they are a neutral entity that ensures that both parties will be treated fairly.