When a person or business is so heavily in debt that there is no foreseeable way they can pay back that debt, bankruptcy is one solution. Bankruptcy serves as a way for individuals and companies that cannot meet their financial obligations to be excused from having to pay all or at least some of that debt at the time it is due. Of course, there are certain rules and procedures in place for filing bankruptcy on the federal level. States do not legislate in this area of law.
What are the Types of Bankruptcy?
There are a few different types of bankruptcy. One of those is liquidation bankruptcy, which requires the debtor to surrender their property so that it can be sold and the proceeds distributed to their creditors to satisfy the debt they are owed. Afterward, the debt is discharged permanently.
With reorganization bankruptcy, the individual or business in debt is allowed to keep their property but must agree to an installment plan to repay their creditors a portion of the total amount they owe.
How Do You File for Bankruptcy?
Anyone who is considering filing for bankruptcy is advised to hire the services of an experienced bankruptcy lawyer. They must also submit a petition, as well as a fee, to bankruptcy court. Usually, the fee is around $300 for personal bankruptcy. The petition must include sworn statements by the individual or business in debt regarding the total amount they owe, their income and expenses and a complete list of any and all assets. After the petition is filed, a court hearing is scheduled to take place to review all the content it includes.
Chapter 7 Bankruptcy
The most common form of bankruptcy is Chapter 7 Bankruptcy. This is the type of bankruptcy that involves the liquidation of assets. All property considered to be non-exempt is turned over to a supervising officer or bankruptcy trustee. The property is considered exempt if it falls under certain categories, such as clothing, work tools, household items and occasionally, your vehicle or home. The debtor is allowed to keep items considered exempt. The bankruptcy trustee then takes the individual’s nonexempt property and sells it. The money earned from the sale is then distributed to the person’s creditors. In many cases, it results in creditors receiving only a portion of what they are owed.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy is generally for reorganization and for individuals who have non-exempt property but don’t wish to give it up. With this form of bankruptcy, the debtor is allowed to keep the property but is required to make monthly payments toward the debt for three to five years. Many debtors find Chapter 13 bankruptcy more beneficial because it allows them to keep their property.
Who Can File for Bankruptcy?
It is worth noting that bankruptcy is not appropriate for everyone. In addition, it should only be used as a last resort when you cannot rely on any other means of paying back the debts you owe your creditors. In addition, anyone who has had debts discharged in Chapter 7 bankruptcy within eight years is ineligible to file again. In the case of Chapter 13 bankruptcy, there is a six-year wait time. If you have too much disposable income, it can also make bankruptcy problematic.
Chapter 11 Bankruptcy
When a business is struggling and owes a considerable amount of debt, it too has the option of filing for bankruptcy. This is Chapter 11 bankruptcy, which allows a company to be protected from creditors while devising a repayment plan. It allows the company time to restructure so that they can have another opportunity to become profitable.
No matter what type of bankruptcy you wish to file for, it’s imperative to have a skilled bankruptcy lawyer on your side. You will have better odds in your situation and can gain valuable knowledge of bankruptcy as a whole.
Georgia Debt Relief knows the trauma of being in debt. That’s why we come alongside you with our experience and training to help you find the best possible outcome for your financial worries. Call us today and tell us what you need help with.