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Personal Insolvency

The principal focus of modern insolvency legislation and business debt restructuring practices no longer rests on the elimination of entities.

The remodeling of the financial and organizational structure of debtors experiencing financial distress so as to permit the rehabilitation and continuation of the business. The principal focus of modern insolvency legislation and business debt restructuring practices no longer rests on the elimination of insolvent entities.

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It focuses on the remodeling of the financial and organizational structure of debtors experiencing financial distress so as to permit the rehabilitation and continuation of the business.

  • For private households, it is argued to be insufficient to merely dismiss debts after a certain period. It is important to assess the underlying problems and to minimize the risk of financial distress.
  • It has been stressed that debt advice, a supervised rehabilitation period, financial education and social help to find sources of income and to improve the management of household expenditures need to be equally provided during this period of rehabilitation.
  • In most EU Member States, debt discharge is conditioned by a partial payment obligation and by a number of requirements concerning the debtor’s behavior. In the United States (US), discharge is conditioned to a lesser extent. The EU spectrum is broad, with the UK coming closest to the US.

A typical proposal would involve a debtor making monthly payments for a maximum of five years, with the funds distributed to their creditors. Even though most proposals call for payments of less than the full amount of the debt owing, in most cases, the creditors will accept the deal, because if they do not, the next alternative may be personal bankruptcy.

A Bankruptcy Exemption defines the property a debtor may retain and preserve through bankruptcy. Certain real and personal property can be exempted on “Schedule C” of a debtor’s bankruptcy forms, and effectively be taken outside the debtor’s bankruptcy estate. Bankruptcy exemptions are available only to individuals filing bankruptcy.

Advocates of BAPCPA claimed that its passage would reduce losses to creditors such as credit card companies, and that those creditors would then pass on the savings to other borrowers in the form of lower interest rates. Critics have argued that these claims turned out to be false. After BAPCPA passed, although credit card company losses decreased, prices charged to customers increased, and credit card company profits soared.

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Mark Sullivan
Head of Department
890.934.2900
m.sullivan@accentuate.com
Hayley Parker
Senior Advisor
890.934.2901
h.parker@accentuate.com
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