Bankruptcy 101- An Overview of Filing for Bankruptcy
Millions of people across the country are making a financial decision to file for bankruptcy. There are many reasons why this happens; it could be a loss of income, medical bills, buried in debt or divorce just to name a few. It is scary for most, not knowing if they will lose their home, car or other property if they filed bankruptcy. If you have more going out each month than coming in and you have done everything possible to get out of it but still cannot meet your monthly expenses, bankruptcy may be your a way out of the situation. It is best to consult with an experienced bankruptcy attorney to find your best option.
So what is Bankruptcy you ask? Well, it is a legal process an individual or organization files for when they are insolvent and can no longer pay their creditors. Depending on which chapter is filed either a debt reorganization (Chapter 13) or asset liquidation (7), both are rising in the number of filings in certain areas of the country. There are currently six types of bankruptcy under the U.S. Bankruptcy Code, but only two are most common, Chapter 7, Chapter 9, Chapter 11, Chapter 12, Chapter 13 and Chapter 15. Chapter 11 cases are also rising as organizations are failing but Chapter 7 & 13 cases remain the most common.
Below is a basic overview for the most common Chapters in Bankruptcy:
Chapter 7 bankruptcy involves the basic liquidation of assets to pay off a debtor’s balances. Under Chapter 7, a debtor who qualifies under the “means test” of the Bankruptcy code will surrender all non-exempt property to a bankruptcy trustee, who then liquidates the property. The proceeds of this liquidation go toward paying the debtor’s creditors, and in exchange, creditors will (barring illegal concealment of assets), grant a discharge. This discharge value varies by state, and creditors still have the ability to repossess any of the debtor’s assets.
Chapter 13 bankruptcy is only available to debtors who have the regular income means to pay off their debt over time. Chapter 13 allows qualifying debtors to go under financial reorganization, which is managed by a Trustee in Federal Bankruptcy Court. This plan typically proposes that the debtor pay his/her creditors over a three- to five-year period.
Bankruptcy filings will negatively affect the debtor’s credit report. Chapter 7 filings remain on a debtor’s credit report for 10 years, and Chapter 13 filings remain on the credit report for seven. During these periods, any company who checks your credit will be able to see the bankruptcy filing, making receiving any further credit very difficult. In fact, under Chapter 13, a debtor may not incur any further debt without first receiving permission from the Trustee and bankruptcy court. If you are thinking about filing bankruptcy, it is wise to select an experienced, reliable bankruptcy attorney to review your situation and give you the best advice. It is possible to find affordable bankruptcy attorneys in Phoenix Arizona. Their ability to fight for you and represent you in court is a valuable asset to you.