Burdened by excessive debt? Filing for bankruptcy can allow you a fresh financial start.
If you find yourself in a challenging and perhaps unexpected financial situation due to job loss, medical bills, overwhelming credit card debt, or a host of other items, filing bankruptcy may be the ideal path to reclaim your financial future. While there are various types of bankruptcy, all Federal bankruptcy laws were designed to offer a fresh start for honest debtors while balancing the need to repay creditors who are demanding payment from limited resources.
Regardless of the type, bankruptcy was designed to help people avoid the kind of permanent damage that can result from aggressive creditor action and prevent them from ever reestablishing themselves as hardworking members of society.
Evaluating the Types of Bankruptcy
Bankruptcy laws are divided into chapters which present different sets of criteria that must be met as well as different levels of debt relief. However, all bankruptcy filings have an automatic stay, which provides protection from any creditor action, including repossessions, foreclosures, garnishments and other types of debt collection. It’s important to consult an experienced bankruptcy law attorney before deciding which type of bankruptcy to pursue.
Often referred to as liquidation, Chapter 7 Bankruptcy allows a debtor to wipe out debts with the stipulation that an assigned court trustee collects and sells all nonexempt property. Proceeds from the sale of these items are then distributed to creditors. However, creditors will only be paid if a case is determined to be an asset case, which exists when the individual filing for bankruptcy protection has assets with value. Whether an asset has “value” is often very subjective and one should always seek expert advice to ensure their property is not in jeopardy.
Certain types of debt cannot be discharged with a Chapter 7 filing, including some types of taxes, student loans, child support or alimony, or debts arising out of criminal acts. Understanding the types of debts that might not be dis-chargeable, as well as knowing the situations that could lead to debts not being dis-chargeable, requires expert advice.
Officially referred to as adjustment of debts of an individual with regular income, Chapter 13 Bankruptcy is a court supervised debt repayment and restructuring plan. Chapter 13 offers the full protection of the U.S. Bankruptcy Court while allowing debtors to repay creditors over a period of three to five years. Unlike Chapter 7, a debtor is able to keep both exempt and nonexempt property while catching up on payments without the threat of foreclosure or repossession. However, debtors also do not receive an immediate discharge of debts—all payments must be completed. The types of debts that can be eliminated are greater with Chapter 13. You should always consult with an expert before beginning a Chapter 13 plan.
Known as a reorganization bankruptcy, Chapter 11 Bankruptcy is most typically used by businesses to gain bankruptcy protection while reorganizing debt without the oversight of a court appointed trustee. Once filed, the debtor becomes the debtor in possession which means that possession of assets is maintained during the reorganization. If the debtor’s plan of reorganization is not confirmed by the court, the case is converted to chapter 7, or a chapter 11 trustee is appointed. During reorganization, the debtor in possession has the right to employ professionals to assist with the case.
Chapter 12 Bankruptcy was designed specifically to assist financially distressed family farmers by allowing them to reorganize their debts and keep their farms. Filing Chapter 12 is easier and less expensive than Chapter 11, but offers more protection than would a Chapter 13 plan in order to protect the assets and address the larger debts of a farm. Only family farmers with regular annual income may file to ensure that they will be able to make the necessary payments.
Expert Bankruptcy Guidance
At Cummings & Kelley, we take a problem solving approach to a consumer and business bankruptcy and are committed to finding the most appropriate solution to the financial needs of every client. We will help you achieve the best results by maximizing the amount of debt you can be relieved from and protecting as much of your assets as you may be allowed. After bankruptcy, you will have the opportunity to rebuild your credit and focus on your economic future.