Filing for bankruptcy requires filling out numerous documents. Since this state of financial status must be brought to court, it’s important that every term is defined accordingly. Not only will defining aid in processing documents, but it also introduces a borrower’s obligations when it comes to repayments according to their bankruptcy chapters.
Defining a Debtor
People facing bankruptcy would ask what is debtor and understand what they should do in filing for bankruptcy. A simple definition of a debtor is the person who owes money to a person or a company. A debtor is also called a borrower by financial companies. Aside from this simple definition, bankruptcy code also defines a debtor as someone who can’t make the repayment on time or completely and thus need to file for bankruptcy to solve their financial issues.
Common Types of Debts
A debtor can owe several entities at the same time. The fact that they have accumulated a lot of debt made handling problematic and result to lack of funds to settle them all. Others may go for debt consolidation for easy debt management. Individuals who can’t consolidate their debts would need to file for bankruptcy and use their assets and other finances to settle everything. Common debts a person have are the following:
- Car loans;
- Bank account debts;
- Credit card debts;
- Utility bill debts;
- Personal loans;
- Legal court debts.
A debtor has different obligations depending on the chapters where bankruptcy filed, but they all aim to repay all the money owed from these entities. A person or business owner may need to file for liquidation or total asset reclaim. Assets and all the money will be divided and distributed according to their priorities. Priorities referred to the debts that should be paid first in case a person had multiple loans. The remaining amount will be paid to the next entities that require payment. Although liquidation is a way of paying debts, debtors can still be protected as some assets may not be seized and will be used to get back on their feet in the future.
In some chapters, a person or entrepreneur can file a restructuring plan for their businesses. Restructuring plan means the business will need to be reorganized to start gaining money again for debt payment. This is often reserved for businesses that still have a future. A certain timeframe will be provided for the debtor to complete repayment.
Filing for Bankruptcy
A debtor can file for bankruptcy on his own or with the help of a bankruptcy lawyer. In filing without assistance, it’s possible to complete the process with the right knowledge about the process. Hiring a bankruptcy expert will make the process faster as he knows the required documents and will help prepare the debtor for the filing process. Many bankruptcy experts offer their services to help everyone who needs assistance for this process.
Overall, understanding what is debtor will help people understand their current status and prepare them for the bankruptcy process. Look for an expert or read more references online to know what to do in filing for this issue.