What is Bankruptcy?
Bankruptcy is a legal process involving a person or a business struggling with debts and needing some way to settle or pay off the money they owe from their creditors.
There are three different bankruptcy chapters in the United States bankruptcy code that a business or individual can file.
- Chapter 7 or the liquidation bankruptcy
- Chapter 11 or business bankruptcy
- Chapter 13 or the debt reorganization plan.
When do you need to declare bankruptcy?
You may file bankruptcy if you have a business that you’re struggling to keep due to financial problems. Paying off your debts and your creditors is not possible in the next couple of years.
Going bankrupt doesn’t necessarily have to be a bad thing. Bankruptcy may have disadvantages. However, bankruptcy can help you get out of debt and protect your properties from foreclosure or repossession.
Bankruptcy provides people a second chance in aiming for financial freedom.
Why should you file for bankruptcy?
As mentioned, if you need help with debt settlement and want to protect your assets from creditors, you’ve looked into other alternatives. Still, if nothing else fits your needs and capability to pay, then you should consider filing for bankruptcy.
When you file for bankruptcy, or when you consider filing for bankruptcy, these things are expected to happen:
Once you file for bankruptcy, as per the United States bankruptcy law, the court should release a mandate to stop your creditors from constantly harassing you for payment. This type of bankruptcy protection will also stop property foreclosure, repossession, and wage garnishment during the whole bankruptcy process.
Before you can qualify for a bankruptcy petition, you are required to meet with a credit counselor and complete a course in financial management.
Bankruptcy trustee takes over.
During a bankruptcy case, the federal courts will assign a bankruptcy trustee to your case to oversee the whole process and handle your properties and the negotiations between your creditors.
Meeting with your creditors
The bankruptcy trustee schedules a meeting with your creditors to confirm the validity of your petition and your financial situation.
How do you file for bankruptcy?
Filing for bankruptcy is not as simple as going to the bankruptcy court and submitting your petition to be out of debt. Many things need to be considered before you can successfully file and put the petition in motion. Here are the essential things you need to remember when you are planning to file:
Hire a reputable bankruptcy lawyer.
When you decide to declare and file for bankruptcy, you need to know the whole process, terms, and other bankruptcy rules. Suppose you are not confident enough to do this independently and you are not well-versed with the legal proceedings. In that case, it’s best to seek legal help from a reliable bankruptcy law firm.
Our Paducah bankruptcy attorneys provide quality and effective bankruptcy services to help you with your bankruptcy filing.
File your bankruptcy forms
With your lawyer’s help, you should file the necessary bankruptcy forms and pay the required fees to get the petition started. Ensure that you list all of your assets and liabilities when you file to avoid complications during the bankruptcy hearing.
The Bankruptcy Process
To successfully file for bankruptcy, you need to pass the means test. This test determines whether you are qualified to file for Chapter 7 bankruptcy. By comparing your income with the state’s median income and calculating your living expenditures, they can determine if you have enough disposable income to settle your debts. If you fail this court, you would probably have to file for Chapter 13 bankruptcy. The bankruptcy case can last for a few months, depending on which bankruptcy chapter you filed.
During the whole process, the court will evaluate your properties and paying capacity. The court will assess your debts to know which ones will be discharged.
It is important to note that not all debts will be eliminated or paid off after a bankruptcy case. There are three types of debts.
- Secured debt or debt with collateral,
- unsecured debt (non-collateral debt), and
- priority unsecured debt (loans without collateral but takes high priority over secured debts).
The following are the debts that are dischargeable after a bankruptcy case is closed:
- Mortgage loan
- Car loan
- Medical bills
- Credit card debts
- Unpaid utility bills
- Short-term non-collateral loans
- Student loans
The bankruptcy court will not eliminate your priority unsecured debts since these are debts owed to the government. A portion of these debts may be paid off by the trustee handling your case since these debts are, after all, a priority, but they will not be discharged. Such debts are:
- Alimony or spousal support
- Child support
- Tax obligations
- Criminal fines
- Payment to personal injury or death you caused
- Overpayment of government benefits
Yes, not all of your debts will be discharged, and the bankruptcy will stay in your record for years, thus affecting your credit score. However, bankruptcy gives you more breathing room. No debt collectors will be harassing you for repayment, and you can focus your energy on paying your non discharged debts. This could mean a fresh start to get back on track on rebuilding your credit standing.
The Role of a Paducah Bankruptcy Attorney
You can file for bankruptcy independently, but that doesn’t mean that you have to go through it alone. It is highly recommended that you seek legal help and get yourself an experienced bankruptcy attorney.
A Paducah bankruptcy attorney will make sure that both parties respect the automatic stay. If they find out that you are still experiencing creditor harassment while the stay is in place, they can file a legal complaint to the court on your behalf. Your bankruptcy attorney can also represent you during meetings with your lenders if you are tied up with work. Having someone who knows the bankruptcy rules and laws can give you that sense of security and convenience.