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When big Investment banks like Lehmann Brothers and Washington Mutual filed for a bankruptcy claim, did you ever wonder what the reality behind the claim was? What is there for the companies filing for a bankruptcy and how did the creditors get their money back? If yes then read on and you will not only get answers to your doubts but also get to know bankruptcy claims inside out. Most of the countries in the world have a clause in the companies act, under which companies are incorporated, which gives the provision to a limited company, to file a document with the court to register a claim against the assets of the company. This claim determines the amount the company owes to its creditors as of the date of the bankruptcy filing and, in some cases the claim also determines the priority status awarded to any creditor. This process is known by different names throughout the world. In the United States this document is called proof of claim. This document also is the point from where the proceedings start. The form is different although they share many similar aspects. Upon receipt the proof of claim or document of claim, the Trustee in bankruptcy must notify the creditor or creditors about the claim being filed and have to seek their assent regarding the proceedings of the claim. If the creditors allow, which, is usually the case, then the case proceeding starts in the court of law. But, if the claim is objected by the creditors then the court sets a hearing date to resolve the dispute by court hearings. The assets of the bankrupt firms are dissolved to pay creditors their share. The claims are first paid to administrative creditors, then to priority unsecured creditors according to their statutory priority, and finally to the non-priority unsecured creditors, with all claims paid pro rata with other members of the class. But is it a good idea to go for bankruptcy? Most of the companies which run out of funds and get debt ridden, on most of the occasion start thinking of going for a bankruptcy route to get out of debt. But if the intention is to get out of debt then bankruptcy is not a wise way. A lot of reputation is lost en route. Bankruptcy also comes up with a lot of bad consequences like poor credit rating. If you or your company has filed for a bankruptcy claim then the credit report is marred for as long as 10 years and thus chances of raising a loan or even a job again, will be minimal.
Banks will seize your bank accounts and cancel your credit cards and everything bought in the name of the company will be sold. Bankruptcy should thus be used as a last resort and not an easy way out. Filing a bankruptcy is a very complex process and credible and legal help should be sought before going for the claim.
If you are thinking of declaring yourself bankrupt, go to DebtConnect. They will guide you through the bankruptcy process as well as offer advice. Debt Connect are a Manchester based Debt Management agency.
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