What is Bankruptcy?
Bankruptcy is a legal process that helps relieve people or entities that cannot repay their debts to creditors. The legal process begins when the debtor files a petition with the court. All of the debtor’s finances and assets are evaluated or measured. The court then decides whether the assets can be used to repay a portion of the outstanding debt, the debtor can set up a payment plan to repay the debt, or if there is no chance of recovery, the debt may be cleared.
Although there is a negative connotation with bankruptcy, it can be a good option for somebody drowning in debt. It is meant as a tool to help people get out from under the stress and worry of debt and start with a clean financial slate. No matter how someone ends up in debt, whether it stems from unwise decisions or overwhelming medical bills or something else, filing for bankruptcy can be the answer to their problems.
The bankruptcy process is handled in federal courts and the rules are outlined in the U.S. Bankruptcy Code. One of the several benefits for debtors who decide to file for bankruptcy includes relieving the debtor of their legal obligation to repay their debts.
Types of Bankruptcy Filings
Bankruptcy falls into two different types: liquidation and reorganization. There are several chapter filings within the Bankruptcy Code meant for different types of entities and requiring different criteria.
Chapter 7 Bankruptcy
One of the most common bankruptcy filings that allow for a fresh start for debtors is the Chapter 7 Bankruptcy. This filing will enable individuals or businesses to sell or liquidate their assets to clear their debt. Some of the unsecured debts that can be repaid through this filing type are credit card debts and medical expenses. Once the court has evaluated all of their finances and liquidated any qualified assets, they will rule whether or not to clear any remaining debt.
Chapter 11 Bankruptcy
Chapter 11 Bankruptcy is a filing used for businesses that want to reorganize, remain in business, and become profitable once again. Under this filing, a company has the power to create plans for profitability, cut costs, and discover new ways of increasing revenue. Chapter 11 Bankruptcy allows businesses to continue their business activities without interruption while designing a debt repayment plan under the court’s supervision. There are also rare occasions where individuals can file Chapter 11 Bankruptcy.
Chapter 13 Bankruptcy
Chapter 13 Bankruptcy is a bankruptcy filing used for individuals who make too much money to qualify for Chapter 7 Bankruptcy. Under this filing, individuals with consistent income can create a workable debt repayment plan. These individuals are responsible for proposing a repayment plan that explains how any debts will be repaid within the next three to five years.
The minimum amount the debtor is responsible for repaying depends on the amount of money they earn, how much the debtor owes, and the value of any nonexempt property. In exchange for repaying their creditors, the courts allow the debtors to keep their property.
The other types of bankruptcy are designed for special entities or circumstances. For example, Chapter 9 Bankruptcy is for municipalities and Chapter 12 Bankruptcy is for family farmers and fisherman.
Benefits of Bankruptcy
One of the several benefits of bankruptcy is that the legal process absolves debtors of any legal obligation to pay off debts. Individuals and businesses who file for bankruptcy do not have to worry about the increased stress of paying debts or being harassed by collection agencies.
Filing for bankruptcy also stops certain entities from collecting debts through various actions like foreclosure, wage garnishment, debt lawsuits, and repossession of properties. Bankruptcy helps to get rid of many debts and protect some property from being sold while the debtor works on turning things around.
Contact a Bankruptcy Lawyer Today
If you are ready to resolve your debt, contact The Law Offices of Emil Fleysher, P.A., an experienced bankruptcy attorney who has filed thousands of bankruptcy cases for clients. Call us today at 888-886-0020 or use the contact form to schedule a free consultation.