Are You Considering Bankruptcy? And How Does It Work

When a person is no longer capable of making payments to their debt or if they are living just to pay bills they might want to consider economic relief through a bankruptcy. Bankruptcy is so much more than just a liquidation of assets. There are a number of ways that a  bankruptcy chapter can help you get back on your feet without having to give up your property. A bankruptcy can help you establish a new credit line, it can keep any debt collector from pursuing a debt, and it may help you establish an adjusted repayment program. Liquidation of a property or estate is not a solution for everyone so it is crucial to understand the different types of bankruptcy chapters that guide the bankruptcy code.

Bankruptcy law provides a variety of economic outlets for single individuals, married individuals, business entities, so it is important to know what type of chapter will work for you. Not everyone wants to liquidate their property to pay off their debts. For instance, if you have a stable income and you can make payments, but you are living on the edge of your check, you may want to consider a ‘reorganization’ bankruptcy that allows you to readjust your debt. When your debt is reorganized through Chapter 11 or more commonly through Chapter 13, you may be capable of paying back a partial amount of your debt in monthly installments that are more in line with your economic capabilities. In another instance, if you are a business owner with a substantial amount of debt, you may work with an attorney that can help you keep your business running while you file through a bankruptcy.

The best thing you can do if you are considering bankruptcy is to do a substantial amount of research, speak with different attorneys, and have a clear understanding of your types of debts. Remember that not all of your debts may be discharged through a bankruptcy so understanding your types of debts will give you a better understanding of how your situation will turn out after you file a bankruptcy. An experienced bankruptcy attorney will be capable of assessing your economic situation and prescribing the correct bankruptcy chapter for your case. To speak with an attorney about bankruptcy you may contact the Bankruptcy Attorney at 424-285-5525.

Bankruptcy is not for everyone so it is crucial to understand your specific situation before you file for bankruptcy. There are loan consolidation or debt readjustment options that you may want to take into consideration without having to file a bankruptcy. Whatever your case may be after you speak with an attorney, you will have a more clear direction of how to deal with your debt.

The following section will discuss the different types of chapters in bankruptcy law and will highlight some of the benefits of a bankruptcy. To learn more you are encouraged to browse our website or contact us today. 

Is Bankruptcy Right For Me?

Bankruptcy is not for everyone. Not everyone will benefit the same from a bankruptcy. As a rule of thumb, you will want to consider the types of debts you have before any filing activity. For example, if you owe more non-dischargeable debt than dischargeable debt, you will want to ask how a bankruptcy can help you. For instance, John owes two thousand in credit card debt, but he owes up to ten-thousand dollars in student loans. John may think that filing a bankruptcy will help him take care of the student loan debt, however, under bankruptcy law, he may not have a student loan debt discharged. In this scenario, John must ask “is this the right choice for me?” “would a bankruptcy really benefit my situation”. In John’s case, it might not be a good option to file for bankruptcy. He must consider the costs of filing a bankruptcy and will have to consider if the process is even worth the time. John does not owe much in dischargeable income so a bankruptcy may not work in his favor.

A clear assessment of your case will allow you to make a sound bankruptcy decision. Bankruptcy is not for everyone and should only be considered as a form of financial relief. There are many ways that you can seek financial relief aside from filing a bankruptcy. It is advised to speak with an attorney before you proceed with a bankruptcy procedure. With that said, there are many benefits to filing a bankruptcy especially when you know you cannot pay off a dischargeable debt. If your earning potentials are low and you know you will be paying off a debt for a prolonged period of time, then there are many reasons that you should consider a bankruptcy.

The Benefits of Filing a Bankruptcy   

Before we kick off how a bankruptcy is beneficial, we would like to address how it disadvantages. If you file for bankruptcy you may experience the following:

  • Embarrassment or a poor self-image
  • Creditors may not want to loan you money
  • Your credit history will show a bankruptcy for ten years
  • You will still be responsible for the non-dischargeable debt

If you are feeling embarrassed about filling a bankruptcy, we would like you to take into account other embarrassing factors such as lawsuits, debt collecting phone calls, repossession, and liens on your property to name a few. A bankruptcy is a responsible thing to consider when there is no way you can pay back your debt. It is more embarrassing to face lawsuits for lack of payments than to file for a bankruptcy. Furthermore, there are creditors that specialize in giving out loans to individuals with a bad credit. You can start building credit faster than if you are stuck making payments for the next ten years. In addition, your credit score can be at a good standing despite having a bankruptcy on your credit history. In some cases, it may be more difficult to explain to a future creditor why you were in a lawsuit than to explain that you have filed for bankruptcy. When it comes to non-dischargeable debt, it is true that it may not be forgiven, but at least you will be protected by automatic stay laws that prevent any creditor from pursuing aggressive debt collecting activity upon filing for a bankruptcy. With that said, you may find that the following benefits apply to your unique case.

You will have another chance to rebuild your credit

Despite the fact that your credit history will reflect a bankruptcy, you can rest assured that there are ways to rebuild credit. There are creditors that will give you a credit line after you have filed a bankruptcy. Of course, the credit will include high-interest rates until you are able to improve your credit score. Another way you can start rebuilding credit is to acquire secured credit such as buying a car or an estate. Secured credit is credit that is backed by real property unlike unsecured credit such as credit cards. After you have some or all of your debt discharged, you will be able to take steps towards building good credit.

You will never ever have to pay back discharged debt

As mentioned earlier, debt can be divided into dischargeable and non-dischargeable debt. This means that some debt may never qualify for a discharge through a bankruptcy. However, any debt that is discharged such as medical bills, credit card debt, and certain tax debts, can never be pursued by a creditor or debt collector. After you discharge your debt through a bankruptcy the automatic stay laws protect the debtor from any debt collecting activity. It may sound too good to be true, but once a debt is discharged there is almost no way that you can be pursued for a payment. 

Your lenders may not pursue aggressive debt collecting activity

For your debtors to pursue any debt collecting activity after you have filed a bankruptcy they will have to petition to lift the automatic stay. Lifting an automatic stay is not an easy accomplishment. Your debtor will have to prove that you are filing a bankruptcy for fraudulent reasons. If they can prove that you are committing fraud, they will be able to lift the automatic stay and then pursue debt collecting activity. In addition, if they prove you are committing fraud you may face criminal charges. However, if you are on the right of the law and you file a bankruptcy, there is very little that can be done to lift an automatic stay. Automatic stay laws are implemented to protect a debtor from aggressive debt collecting activity after a bankruptcy is filed. This means that there must be a good reason in order to allow a debt collector to pursue a debt after a bankruptcy is filed.

You will receive credit counseling

Sometimes you file for bankruptcy because you have been hit with high medical bills that you may never be able to pay off. Other times, we take out a substantial amount of loans when our earning potentials are high. We fail to realize that earning potentials change with time meaning that what is affordable today may not be affordable tomorrow. When we take out loans or credit lines without assessing the stability of our jobs, we may find ourselves unable to pay back the debt in the future. Credit counseling will help you assess how you got yourself into a bankruptcy situation and will give you tips on how you can rebuild your credit and maintain a good credit score.

Commonly filed bankruptcies

Debtors that are considering a bankruptcy should understand the types of reliefs that are offered through different chapters. This following section will provide a description of the most common bankruptcy chapters that guide the bankruptcy code. The bankruptcy chapters are intended to address different circumstances, bankruptcy is not a one-size fit all procedure.

Chapter 7

A Chapter 7 bankruptcy is amongst the most popular ways to file a bankruptcy and is known as liquidation. Chapter 7 is also the reason why people have many misconceptions about bankruptcy law. Since Chapter 7 is very popular many individuals believe that it is the only way to file a bankruptcy when in fact there are multiple ways to file a bankruptcy. If you file a Chapter 7, you will find that all of your dischargeable debt is completely wiped out. You will not have to pay back your debt, however, under this chapter, you will lose all of your non-exempt property. Property that is worth over a certain amount, for instance, a vehicle that is worth more than $4,800 dollars may be repossessed and sold off to pay your debt. Chapter 7 is a complete liquidation of your non-exempt property and the proceeds go to pay off any creditor that you owe.

Chapter 13

Another popular chapter is Chapter 13 bankruptcy. Under this chapter, you have the option of reorganizing your debt. You may keep all of your property, however, you must produce a repayment program that attempts to pay back your creditors within five years. Under Chapter 13 you may establish a repayment program that ranges from three to five years. After the end of the program, most unpaid debt is discharged.

If you want to file through Chapter 7 bankruptcy or through Chapter 13 bankruptcy, you will have to make sure that you are eligible. Not everyone can file through a Chapter 7 or through Chapter 13, but anyone is capable of filing through a Chapter 11. A Chapter 11 bankruptcy works much in the same way as Chapter 13 except that it is usually more time-consuming.

Bankruptcy is a big financial step that requires a lot of research. In order to ensure that you are filing through the correct chapter, you will want to consult with a local attorney. If you are interested in learning more about bankruptcy law and how the laws apply to your unique case, you may contact the Bankruptcy Attorney at 424-285-5525. We will help you through the complete bankruptcy process to ensure that your documents are filed correctly the first time. Bankruptcy is not for everyone so be sure you are well informed before you engage in a bankruptcy procedure.