It’s important to understand how bankruptcy works before making the decision to file. Consulting bankruptcy attorneys can educate an individual on what to expect during the process and afterward. Bankruptcy procedures can vary from state to state, so it’s vital to know the laws pertaining to the state that an individual will be filing in.
Bankruptcy is a complex process that involves making decisions that may have a lifetime effect. It should not be considered until all other options have been explored. Since filing the proper paperwork can be difficult, an attorney can offer valuable assistance with the proceedings. A consultation can help to determine if the debts and assets a person has meet the qualifications for bankruptcy.
Making the right decision can be difficult without understanding the different categories. There are two types of bankruptcy an individual can file for: chapter 7 and chapter 13. An attorney can help an individual to navigate through the pros and cons of each option by looking at all of the debt and assets involved along with the total income that is available to live on.
Chapter 7 provides protection from creditors by liquidating assets to repay debts. A court-appointed trustee has the duty of selling any nonexempt assets to repay creditors, and whatever remaining debt is left is then discharged by the court. Chapter 7 does not require filing a repayment plan, as in chapter 13. Chapter 7 is used more often by individuals since it takes less time to complete the process, usually three to six months.
A person qualifies for chapter 13 bankruptcy if it is determined there is enough income to meet repayment obligations after taking into consideration all allowed expenses and required payments for secured loans, such as a car payment. A plan is then filed for repayment of the outstanding debt. The repayment plan can take between three to five years, but the benefit is being able to retain possession of all assets.
Bankruptcy can provide an individual with much-needed relief when debt becomes too overwhelming. It provides a fresh start once the process has been completed. After bankruptcy, an individual can no longer be held accountable for debt that was included in the paperwork, and creditors can no longer pursue payment for debts the court discharged.