What is Bankruptcy?
Individuals and businesses often become overextended financially. They purchase items and services that exceed their ability to pay. Some use various types of loans and credit, exacerbating their financial situation. Once expenses exceed their ability to pay, the only option is to file bankruptcy.
Bankruptcy is the legally declared inability or impairment of an individual’s or organization’s ability to pay creditors. Creditors can request a declared state of bankruptcy to recoup a portion of their owed amounts; however, in most cases, the bankrupt individual or organization initiates the process.
What do Private Investigators Need to Know?
Private investigators (PIs) often handle cases involving financial disputes, fraud, asset recovery, or background checks, making knowledge of bankruptcy essential to their work. Bankruptcy filings provide valuable insights into an individual’s or organization’s financial health, legal obligations, and history of financial distress, which can be critical in many investigative contexts.
When investigating fraud or embezzlement, bankruptcy records can reveal patterns of financial mismanagement or hidden assets. For example, individuals attempting to conceal assets during a bankruptcy proceeding may provide false statements or transfer property improperly. A PI with knowledge of bankruptcy laws can identify these discrepancies and uncover fraudulent activity.
In family law cases, such as divorce or child support disputes, understanding bankruptcy can help PIs trace assets that one party might claim to have lost through bankruptcy. Similarly, in corporate investigations, filings can highlight a company’s creditors, financial struggles, or potential conflicts of interest.
Bankruptcy knowledge also ensures that PIs operate within legal boundaries, as they must respect the protections afforded to debtors under the applicable laws. By understanding bankruptcy, private investigators can deliver accurate, legally compliant findings while safeguarding their clients’ interests, making this knowledge a crucial part of their expertise.
Chapter 7 Bankruptcy
There are two main types ofBankruptcy – Chapter 7 and Chapter 13.
Under Chapter 7, an individual’s assets are turned over to a trustee. The assets are then sold off to repay creditors. Once you’ve filed, the creditors cannot attempt to collect funds directly from you. You are no longer responsible for the debts once everything is sold and the creditors have been paid. Some debts, such as alimony or child support, certain types of judgments and criminal fines, taxes, student loans, items of substantial value recently purchased, and adequately executed contracts for land and automobiles, cannot be discharged.
Chapter 13 Bankruptcy
The other popular type is Chapter 13. Under Chapter 13, debts are reorganized into a more manageable schedule and amount. Similar to Chapter 7, certain obligations, such as alimony and child support, criminal fines and judgments, and student loans, cannot be discharged.
Determining which type is best is up to the individual. It is wise to consult a Certified Public Accountant (CPA) and an attorney if you are considering filing.
If you’d like to learn about other law-related terms, view legal and law definitions in our Investigation Glossary. Also, if you need legal forms related to filing, view the complete list at Nolo.com.
Bankruptcy Resources, Tools, and Websites
The following tools may help conduct investigations related to bankruptcy cases. They provide information on filings, statistics and analysis, legislation, and more.
Run a Search at BeenVerified – If you need to search for information about a person’s financial background, use this simple online search tool to get the details. You can search by name, phone number, email address, or property address. Just enter the appropriate information and click enter. The search tool will search billions of public records and provide a list of names that match your search. Select the person you’re searching for and build a report. In addition, the online search will search for financial information, tax liens, and judgments.
Other Online Resources
- American Bankruptcy Institute – Comprehensive information about legislative news, statistics, judges’ opinions, code, and analysis.
- Administrative Office of the US Courts – Federal forms, resources, administrators, and resources for learning about financial matters and the legal ramifications of declaring.
- American Board of Certification—The American Board of Certification certifies attorneys as business, consumer, and creditors’ rights law specialists.
- National Association of Bankruptcy Trustees – Contains news of upcoming seminars, links to legislative information about bankruptcy, and a listserv and library for members only.
- National Association of Consumer Bankruptcy Attorneys – Contains information about the association and cases of interest.
- US Bankruptcy Law – Code courtesy of the Legal Information Institute of Cornell Law School.
Questions and Comments
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