The Discharge in Bankruptcy

A “Discharge” in bankruptcy specifies that a debtor is released form his personal liability in case of some specified debts. In other words it can be simply said that a debtor is no longer required to pay for the debts for which he is discharged from the court of law or any other law prevalent in the country. The discharge is a permanent order from the court of the law prohibiting the creditor of a debtor from taking any form of action or communication from him (his debtor) in any way to recover any amount of money. A discharge may release a debtor from his personal liability but a secured creditor can obviously enforce his lien on the property to recover from the property secured in lien.

The discharge in bankruptcy depends on various factors such one of which the type of case a debtor files of discharge i.e. Chapter 7, 11, 12, or 13. The timing for discharge too depends on the type of case filled by the debtor.

The debtor will automatically get discharged until and unless there is a litigation involving objection to the discharge. As per the Federal Rules of Bankruptcy the communication of the discharge should be sent to all creditors, the U.S. trustee, the trustee in the case, and the trustee's attorney, debtor, and the debtors attorney. All the parties concerned are informed about the discharge of all the dues from the debtor and cautioned the creditors via notice that continuing collection efforts could subject them to punishment for contempt.

Forensic Accountant: Role played in unfolding various frauds and crimes

A company seeks the help of forensic accountant when it smells something wrong in financial dealings and is not able to find the reason behind it. This may be some mischief, frauds or anything that can cause damage in the financial position of the Organization. Fraud can be of various types such as, forging important documents, cooking up financial information, misappropriation of cash/ stock and money laundering. The stock frauds in India can be categorized into various types: the Flying Companies including IPO web as the investors were attracted by huge returns from the listed shares and in the early 20th century the norms and principles of the regulatory bodies were not strong. Brokerage Misguidance which includes misleading customers by guiding investors in an uncanny manner. High Tech Frauds emerges with the new technology being coming up leading to highly vulnerable frauds. Market Manipulation case can be traced from the example from Ketan Parikh and Harshad Mehta been noted for making abnormal profits by manipulating the market prices of the shares deliberately. There could be various reasons behind a fraud like, ego, fraud intensity, greed etc, and it would start from a very little thing and then after sometime it becomes a part & parcel of the life of the fraudster. A forensic accountant opines that the management should adopt a simple policy that it “Trust, but to Verify” principle since it is found that most of the forgery are done by the CFO’s the most trusted employee by the management. In forensic investigation a group of professional forensic accountant starts its investigation by meeting the senior members of the management and starts shooting questions. The investigator then plans the structure of the interview, place of the interview, number of interviews and the series of questions that would be asked. In order to be successful in investigations, the investigator follows some general principles during investigations that include: conduction of the interview with the potential suspects, manner the questions are posed, shoots pertinent questions depending on the fact whether the interviewee is a lead or a prime suspect, observing the body language and words that could disclose deception. . We can say that corporate world should be very alert and watchful so as to avoid the crimes and frauds that have come up with the so called globalization.

Consumer credit counseling: An overview

Consumer credit counseling is a way to avoid bankruptcy. It is always advisable to go though credit counseling for a debtor, at least six months before filling a bankruptcy. Credit counseling is a professional service in which credits counseling agencies or a body provides education about the financial problems and finds a solution to get a way out from debt burden, depending on the financial condition. A credit counselor will go through your financial profile and access your debt level in order to make an arrangement for making a payment plan to overcome the debt. Counselor can access the financial condition of the individual and the prevailing market condition to bargain for lower interest rates for the debtor with the creditor. The counselor access the financial condition of the individual through various means, it can be number of accounts, balance, minimum payment, balance due, and any past due account. The counselor after this will also considers your monthly income and bills. The counselor uses this summarized information to maker out a reasonable debt management plan (DMP) to pay off the debts. The proposed plan is then sent to the creditor for their approval. The creditor once approves the DMP, sent by the counselor the debtor can start making the payment following the DMP. The payment will be made through the counseling agency. The credit counselor once receives the payment will disburse payment to the creditors in accordance with the DMP. The one way it affects is that the credit accounts are closed for a debtor as long as the DMP continues.

Ways to avoid Bankruptcy

There can be various ways to avoid filling a bankruptcy even when you find yourself in knee deep debt situation just by following some simple steps:

Debt Settlement: This is a situation suitable for debtors who don’t wish to continue with the burden of monthly payments and like to pay off all the dues with a small negotiation. A debt settlement program sometime referred as debt reduction can help an individual to cut down the debt amount by 40-60% of the original amount. A professional or collection agencies can help to negotiate your debt with the creditors, banks etc, or a consumer can do it by himself.

Debt consolidation program: A suitable debt consolidation program can be chosen in order to avoid bankruptcy and lead a debt free life. In this program all the monthly bills or credit card bills are consolidated to a single bill which will reduce the burden of extra finance charges, interest, late fee and other financial charges. Debt consolidation also has a positive impact on your credit score which really make sense to choose for consolidation.

Debt Management: It is a program where a credit counseling agency offers free service on managing debt by keeping you update on your bills so that all the bills or dues are cleared by time and dues are not accumulated. This also provides services like minimizing or waiving interests or fine levied due to late payment or on payment of the dues on time.

Pay Day loan consolidation: Pay day loan consolidation is also a program to choose for avoiding debt situation. In this case also multiple pay day loans can be consolidated into an affordable monthly payment.

DIY Plan: The last but the most effective way to avoid a bankruptcy situation is to go for a DIY Plan (Do it yourself plan). This seems to be tough whereas it is easy to go for a DIY plan for debt settlement without taking the help of professional. In this program you have to first communicate and negotiate with your creditors and then work upon a budget to meet your regular expenditure.

The above ways are definitely a ways to avoid an unwilling situation called bankruptcy but it can only happen if you first belief that you are in debt and wish to pay off all dues that would lead to have a debt free life.

Avoid Bankruptcy: Several Reasons behind it

A consumer when find him in the trap of debt would definitely would like to avail the benefit of Chapter 7 or Chapter 13 (Bankruptcy), wherein a debtor gets a chance to eliminate or reorganize his debts by selling his assets or by following a repayment plan which is affordable to him. If one finds a simple way of being out of his debt is to be declared as bankrupt then it is not a really very good idea. Try to avoid this! The simple reasons behind this are that Bankruptcy worsens the financial situation of the debtor by ruining his property and hitting the credit profile badly. The bankruptcy law has several negative consequences:

• The credit rating of a consumer is badly hit with the filling of the Chapter 7 (Bankruptcy) case. The credit score is lower down from around 200-250 points which creates a bad impact on the financial profile for at least next 7-10 years. It will also hamper your entry to towards the easy access to the financial market. This indicate towards consumer loans and credit cards.

• Bankruptcy does not protect all types of assets in case of filling chapter 7, so there are chances of loosing the home, car and other assets since assets are sold to pay off the dues and until they qualify for federal or state exemption chances are that you can loose properties if personal bankruptcy is not avoided.

• Bankruptcy or Chapter 7 filling will not get rid of all the dues such as student loans, taxes and other unpaid dues. Thus it is better to avoid bankruptcy and go for a debt settlement or arrange for an alternative payment plan with the creditor according to the convenience and financial ability which will help to reestablish your credit in the market fast.

• It will affect your financial record badly, you will not be able to buy or rent a home or starting a business would be difficult, it will also led you to go through a tough security clearance for any legal formalities.

• The reestablishment of new credit would be very difficult since the bad credit score will remain in your financial record for around 2-4 years. During this times getting a loan or credit card will be very difficult and even if a consumer gets it will be on higher rate of interest and tough financial terms and conditions.

• Even if someone has filed bankruptcy, there's a chance that the creditors & lenders may repossess or foreclose property on which they hold a lien. This is because bankruptcy relieves you from the personal liability to repay debt. Until a consumer try to pay down the entire balance, creditors/lenders have the right to repossess or foreclose property as there's already a lien on it.

• Bankruptcy law even protecting by 401k retirement plans can protect only $1 Million in the debtor account and beyond which any amount would be used to pay off the debts.

We find that it is better be avoided than to be trapped under the net of Bankruptcy