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Insolvency, in its nascent stage, was formulated for the benefit of creditors. This gave power to the creditor to confiscate all the property of the borrower to compensate for his loss. This method not only left the borrower penniless but also caused him to serving imprisonment. However, the system has been transformed a good deal with the passage of time. In modern times, bankruptcy is normally filed by a debtor who acknowledges his inability to repay his loans. This enables the debtor to easily re-organize his finances and attempt at partially repaying what he owes while continuing his business. The legal norm that governs bankruptcy varies from country to country and even from state to state. For example, in the US adheres to a Bankruptcy Code based on which there are six different types of bankruptcy called Chapters while Netherlands follows the Dutch Bankruptcy Code. Again, Tampa Chapter 7, popularly called straight bankruptcy, and Tampa Chapter 13, also known as Wage Earner Bankruptcy, may have laws that are different from those followed in other states of the US.

When an individual files for Straight Bankruptcy, he or she needs to give up all properties that are free from taxes and other liabilities. The trustee handling the bankruptcy takes the returns of these assets and splits it among the creditors. This is how the debtor is relieved of a part of or the whole loan sum, as may be applicable for the proceeds derived from the surrendered possession. The US bankruptcy laws permits a citizen to file for this type of bankruptcy just once in every eight years. Post the amendment made in the year 2005, the person applying must also undergo a test to find out whether he or she is eligible to file for this bankruptcy. Inability to pass this test leads to the rejection of the bankruptcy application and at times recommends Wage Earner Bankruptcy to the applicant. It is important to be advised by an efficient bankruptcy attorney to find the best way to deal with this insolvency.

As the name suggests, Wage Earner Bankruptcy is meant for those who have a steady flow of income. Under this type, the debtor is required to go for a repayment plan wherein the applicant chooses to repay his debt with part of his income. Depending on factors like income, expenditure, assets, etc., the repayment tenure can be anything from three to five years. The tenure cannot cross the five years’ limit. In this case too the trustee plays a pivotal role. All payments are made to the trustee who then hands over the money to the creditors involved. Again, in case of the debtor’s failure to pay, legal proceedings will act upon the trustee’s motion.

As is evident, it is important to hire a bankruptcy lawyer or attorney who has the necessary expertise and efficiency to handle your case. It is also important that you maintain great transparency with your lawyer. Failing to comply could mean that you are committing strategic bankruptcy or even bankruptcy fraud, both of which can have nervous effects on your bankruptcy case.