How To File Bankruptcy In The US

Bankruptcy laws are a series of federal laws enacted to allow people to be relieved from their debts and start over with a clean slate. The laws changed in 2005, making the road to a fresh start more complicated, so it is important to completely understand the benefits and drawbacks before you decide to declare bankruptcy. Understand how to know when you should file bankruptcy, the different types of bankruptcy, and the procedure for filing.

Method 1. Deciding To File For Bankruptcy

Consider other options. Bankruptcy should only be used as a last resort. Before filing, try other options available to you to pay off your debts. Contact your creditors and try to negotiate for a loan settlement or a repayment plan with lower payments. Alternately, you can try a short sale of your assets to cover your debt, assuming you are not underwater on your loan. Try consulting with a debt management agency before deciding to file for bankruptcy.


Analyze your debt. Certain kinds of debt cannot be discharged, or erased, even if you declare bankruptcy. Categorize all of your debt and calculate how much falls into categories that cannot be discharged. If the majority of your debt cannot be erased, then bankruptcy may not the right option for you. Note that each state has specific provisions for those assets which are exempt from bankruptcy. Be sure to check state law. The following kinds of debt cannot be discharged in a bankruptcy:
Alimony
Child Support
Debts that arise after bankruptcy is filed
Some debts incurred in the six months prior to filing bankruptcy
Loans obtained fraudulently
Debts from personal injury while driving intoxicated
Debts from willful and malicious injuries to person or property
Some student loans
Some taxes
Secured loans, as lenders can foreclose on their capital
Know which assets are exempt from seizure in bankruptcy proceedings. While bankruptcy proceedings will seek to seize and sell off your valuable assets to repay creditors, there are some assets that are protected under state law. The exempted assets will depend on the type of bankruptcy you are filing for and your state's laws. Assets may be completely protected or protected up to a certain value. For example, there might be at automobile exemption of $5,000, meaning that you could keep a $4,000 car but not a $20,000 one.
Common protected assets are cars, wedding rings, and your home.
Some states may offer "wild card" exemptions that allow you to keep any other valuable assets up to a certain amount.
Chapter 13 bankruptcy allows you to keep all of your assets, but you can reduce your liability to creditors by selling of assets of significant value.
Understand that bankruptcy does not erase debt for cosigners. A cosigner agrees to pay your debt in the event that you cannot pay. For example, a parent may have cosigned an auto loan for you when you graduated from college because you had little or no credit. However, if you declare bankruptcy, a cosigner on your loan is still be legally obligated to repay your debt. For example, your parent will still have to repay all or part of that car loan, even if you declare bankruptcy.


Learn about the different kinds of bankruptcy. Bankruptcy in the United States is handled in federal court under the rules of the U.S. Bankruptcy Code. The U.S. Bankruptcy code identifies several different kinds of bankruptcy. These are usually referred to by their chapter in the U.S. Bankruptcy code.
Individuals and businesses may file for Chapter 7. Property may be liquidated to pay off creditors. Secured debt may be eliminated, or you have the option of allowing the property to be repossessed or paying the creditor a lump sum equal to the current value of the property. Your income must be below a certain level to qualify for Chapter 7.
Chapter 13 is also known as “wage earner” bankruptcy. Under Chapter 13, if you have a reliable source of income, you can propose a repayment plan to your creditors that pays them back over the next three to five years. Your debts must be below $1,149,525 in secured debt and $383,175 in unsecured debt. Note that the amount received by the creditors is established by your income after bankruptcy, not the amount of debt owed.
Municipalities, such as cities, towns, villages, taxing districts, municipal utilities, and school districts can reorganize under Chapter 9.
Businesses can reorganize under Chapter 11 or liquidate under Chapter 7.
Chapter 12 is similar to Chapter 13. It is reserved for businesses for which 80% or more of debt is from the operation of a family farm or fishery.
Understand the Consequences of Bankruptcy. Learn about the kinds of debt that can be erased and what debts will not be forgiven. Recognize the impact on cosigners to your loans. Decide if you can live with the negative impact bankruptcy has on your credit. Evaluate whether or not you even qualify for bankruptcy.
The impact bankruptcy has on your credit is largely determined by how good your credit is to begin with. If your credit score is high, it will probably take a huge hit and drop significantly. If your credit is already pretty bad, bankruptcy might not lower your score by very much.
The more accounts associated with the filing, the bigger the impact on your credit score.
If you file for Chapter 7 or 11, it will remain on your credit report for up to 10 years.[13] If you file for Chapter 13, it may stay on your report for up to seven years.
A Chapter 11 bankruptcy will stay on the business's credit report, not the individual owner's, unless they file a personal bankruptcy.

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How To Write A Business Letter

Need to write a polished, professional letter? Most business letters follow an established, easy-to-learn format that you can adapt to any type of content. A business letter should always contain the date, information about the sender and recipient, and a few body paragraphs. Follow these steps and modify as necessary to fit your company's standards.

PART 1. Beginning The Letter


1. Know the format. Whatever the content of your letter, there are a few business standards to follow regarding the way it looks. Business letters should be typed and composed in a common font such as Arial or Times New Roman. Employ block paragraphing. This means that you start a new paragraph by hitting "return" twice. Don’t use indenting for block paragraphs.
Use one-inch margins on all sides.
An emailed business letter should also be composed in a common font. Don't use script or colors other than black and white in a business email.

2. Choose the right kind of paper. The letter should be printed on 8.5” by 11” (known as “letter size”). If you are outside the U.S., you might use size A4 paper. Some lengthy contracts may be printed on 8.5” x 14” (“legal size”).
If you're printing the letter to send, consider printing the letter on company letterhead. This lends it a more professional air and provides your company's logo and contact information.

3. Include information about your company. List your company name and the company address, with each part of the address written on a different line. If you're self-employed or an independent contractor, add your name either in place of the company name or above it.
If your company has pre-designed letterhead, you can use this instead of typing out your company and address.
If you're typing out the address, it should appear either right or left justified at the top of the page, depending on you and your company's preference.
If you’re sending the letter to an international location, type out the country in capital letters.

4. Include the date. Writing out the full date is the most professional choice. For example, write either "April 1, 2012" or "1 April 2012." This should appear left justified a few lines below the sender's address.
If you wrote your letter over several days, use the date that you finished the letter.

5. Add the recipient's information. Write out the recipient's full name, title (if applicable), company name, and address in that order, with each piece of information on a separate line. If necessary, include a reference number. The recipient's information should be left justified a few lines below the date.
It is best to address the letter to a specific person. This way, an actual person will be able to respond to your letter. If you don’t know the name of the person to whom you should send the letter, do a bit of research. Call the company to find out the person’s name and title.
6. Choose a salutation. The salutation is an important indicator of respect, and which one you use will depend on whether you know the person to whom you're writing, how well you know them and the level of formality in your relationship. Consider the following options:
Employ "To Whom It May Concern" only if you don't know whom, specifically, you're addressing.
If you do not know the recipient well, "Dear Sir/Madam" is a safe choice.
You may also use the recipient's title and last name, e.g. "Dear Dr. Smith."
If you know the recipient well and enjoy an informal relationship with him or her, you may consider a first-name address, e.g. "Dear Susan."
If you are unsure of the recipient's gender, simply type the whole name, e.g. "Dear Kris Smith."
Don't forget a comma after a salutation or a colon after “To Whom It May Concern.”]
PART 2. Composing The Body


1. Strike the right tone. Time is money, as the saying goes, and most business people hate to waste time. The tone of your letter, therefore, should be brief and professional. Make your letter a quick read by diving straight into the matter and keeping your comments brief in the first paragraph. For instance, you can always start with "I am writing you regarding..." and go from there.
Don't concern yourself with flowery transitions, big words, or lengthy, meandering sentences - your intent should be to communicate what needs to be said as quickly and cleanly as possible.
Be persuasive in your letter. Most likely the purpose of your letter is to persuade your reader to do something: change their mind, correct a problem, send money or take action. Make your case.
2. Use personal pronouns. It is perfectly fine to use “I,” “we,” and “you” in your business letter. Refer to yourself as “I” and your reader as “you.”
Be aware if you’re writing the letter on an organization’s behalf. If you are stating the company’s perspective, you should use “we” so that the reader knows that the company stands behind your statement. If you are writing your own opinion, stick with “I.”
3. Write clearly and concisely. Let your reader know exactly what you are trying to say. Your reader will only respond quickly if your meaning is crystal clear. In particular, if there is some result or action you want taken because of your letter, state what it is. Explain your position in as few words as possible.


4. Use the active voice. When describing a situation or making a request, make sure to choose the active voice, rather than the passive voice. The passive voice can make your writing ambiguous or impersonal. In addition, the active voice is more streamlined and straight to the point.[7] For example:
Passive: The sunglasses are not designed or manufactured with attention to their durability.
Active: Your company designs and manufactures sunglasses without attention to their durability.
5. Be conversational when appropriate. Letters are written by people to people. Avoid form letters if possible. You cannot build a relationship with canned impersonal letters. However, stay away from colloquial language or slang such as "you know," "I mean," or "wanna." Keep the tone businesslike, but be friendly and helpful.
If you know the recipient well, it's fine to include a friendly line sending good wishes.
Use your judgement when determining how much personality to reveal. Sometimes adding a little humor is actually helpful in a business setting, but err on the side of caution before making a joke.

6. Be courteous. Even if you are writing with a complaint or concern, you can be courteous. Consider the recipient's position and offer to do whatever you can, within reason, to be accommodating and helpful.
For example, a discourteous complaint might read: “I think your sunglasses suck and I am never buying them again.” A courteous complaint might read: “I am disappointed with the construction of your sunglasses, and I plan to take my business elsewhere in the future.”
7. Use “second page” letterhead for additional pages. Most business letters should be concise enough to be one page in length only. But if you have something lengthier, such as a contract or legal findings, you may need additional pages. Use “second page” letterhead, which usually has an abbreviated address and is made of the same type of paper as the first page letterhead.

8. Wrap it up. In the last paragraph, summarize your points and clearly outline either your planned course of action or what you expect from the recipient. Note that the recipient may contact you with questions or concerns, and say thank you for his or her attention to the letter/matter at hand.

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