Bankruptcy is briefly defined as a process in which debtor obtains relief from his/her debts through the court. The relief varies in form and it includes full partial discharge of the debt or the nuisance of an imbursement plan consistent with the debtor’s financial means. (Larson, 2000) Types of bankruptcy vary according to its function. One of the most common types of bankruptcy is “Chapter 7” or “Straight Bankruptcy” or “Liquidation. ” This is also known as Personal Bankruptcy. Another is “Chapter 11”, which is primarily used by businesses.
There is also “Chapter 13” or “Wage-Earner Bankruptcy. ” Finally, “Chapter 20” bankruptcy is the process of filing of a “Chapter 7” bankruptcy to discharge unsecured debts, followed by “Chapter 13. ” (Larson, 2000) Because of the robberies and troubles with the call center, the call center might file bankruptcy, in which it has already owed the firm over $40,000,000. In this case, we are in tasked of finding the consequences of the call center filing bankruptcy. What are the benefits and negatives if the call center will file bankruptcy?
Brown and Seeyle emphasized that bankruptcy is neither a personal nor an emotional decision. Rather, it is a financial decision based on the amount of debt and the present ability to repay debts. When the expected time period of repayment exceeds the time it would take to rebuild credit, just like in the call center’s case, then it is the time to consider bankruptcy. At this place in time, the call center has accumulated more debt than they can be able to repay in the near future. The call center will possibly benefit greatly from filing bankruptcy.
This will be debt-free start. By filing bankruptcy, the call center has the chance to rebuild and re-establish their credit in line with the law. (Brown & Seelye, 2008) Meanwhile, there is a widely held misconception of Bankruptcy in which Ben Franklin from Franklin Debt Relief explained, wherein “it’s the debtor’s version of the “get out of jail free” card in Monopoly. ” Most people know that bankruptcy affects credits for 7-10 years; little did they know that they may have to pay back the debt anyway.
Franklin stated the formal definition of bankruptcy as “a proceeding in federal court in which an insolvent debtor’s assets are liquidated and the debtor is relieved of further liability. ” It may also come out as “the process of completing your debts for free. ” (Franklin, 2008) In this manner, the call center, even with bankruptcy, still have to pay back portion of the debt. The call center, in any circumstances, may avoid filing bankruptcy. The most possible solution is that the Call center’s assets be sold to earn sufficient funds and later pay the firm.
However, if the firm may prove that the call center has intentions of not paying the firm, then it’s the best way for the call center not to file bankruptcy. The call center will still have to pay the firm back. Chapter 7 Bankruptcy or “straight bankruptcy”, a popular form of bankruptcy, permits the defaulter to start all over again. This is generally filed by those who have not any enough funds to pay for their debt. If the call center has no hope in paying their debts to the law firm, then they should file Chapter 7 Bankruptcy. However, this may ruin their credits and they will still be responsible for their debt.
They will also pay attorneys who will work in the case. In this case, the call center may consider filing Chapter 13. As for chapter 13, it is the reorganization of an individual consumer’s debt with a new payment schedule. If the call center has assets they want to protect Chapter 13 is another way. However, Chapter 13 ruins the credit. It will remain on the call center’s credit for up to 10 years. The call center, on another point, may have to consider credit counseling or a debt management agency. References Brown & Seelye. The Decision to File. Washington State Law Firm.
Retrieved February 1, 2008, from http://www. brownandseelye. com/bankruptcy375/thedecisiontofile. html Franklin, Ben. Avoiding Bankruptcy Franklin Debt Relief. Retrieve February 1, 2008, from http://www. franklindebtrelief. com/avoid-bankruptcy. html Larson, Aaron. (2000). Bankruptcy Law – An Overview. Law Offices of Aaron Larson. Retrieved February 1, 2008, from http://www. expertlaw. com/library/bankruptcy/bankruptcy. html Chapter 13 and 7 Bankruptcies. American Bankruptcy Courts. Retrieved February 3, 2008, from http://www. bankruptcy-courts. net. /chapter-13. html