How an Accountant Can Help in the Bankruptcy Process

Having an accountant handle your bankruptcy will make the process go smoother and quicker. Bankruptcy accounting is accounting in relation to the laws of bankruptcy, and can be invaluable if you find yourself needing to file for bankruptcy but are uneducated about the myriad of laws surrounding the process.

The first and most important roll of an accountant in the bankruptcy process is to help you determine whether or not you actually need to file for bankruptcy. Your accountant should be well aware of your financial circumstances, and can help you try and find alternative ways to regain your financial footing before resorting to bankruptcy. If bankruptcy cannot be avoided, the accountant will then help you determine which kind of bankruptcy to file for.

There are several different kinds of bankruptcy, and all have different qualifications and procedures of which your accountant should be well aware. Chapter 7 bankruptcy is very straightforward: your assets are liquidated and used to repay your creditors. This type of bankruptcy is used for individuals debtors and it is important that an accountant is involved, as some people try to use Chapter 7 bankruptcy to simply "get rid" of their debt.

The next kind of bankruptcy is called Chapter 13. Chapter 13 is filed when the debtor needs to restructure his or her debt. If Chapter 13 is granted, which happens less often than Chapter 7, the debtor will still retain some of the original debt, but will be able to pay less of it off at a slower rate.

For larger debts, normally incurred by businesses, there is Chapter 11 bankruptcy. Chapter 11 bankruptcy is only awarded if the client has more than one million dollars in debt, and will last at least ten years on your credit report.

The last kind of bankruptcy is Chapter 12, which is reserved for family-owned farming businesses.

After your accountant determines which kind of bankruptcy you should file for, he or she will attain and complete all of the necessary paperwork and submit it to the proper places, according to the regulations set by your state. The accountant will see you through the entire bankruptcy process, and may even be called to testify about the legitimacy of your claim for bankruptcy in court. Because of this, it is important to have an accountant that you trust and that has full disclosure concerning your finances.