A bankruptcy filing is a legal proceeding wherein a debtor who is no longer capable of paying debts files a bankruptcy petition. Such are filed in the relevant bankruptcy court. Filing for bankruptcy enables debtors to repay creditors or have certain debts wiped out. The qualifications for filing bankruptcy look into an individual’s monthly income, living expenses, and the types of debt that he or she owes. The bankruptcy means test will determine which bankruptcy option will be the best for you.
Your bankruptcy case will involve dischargeable and non-dischargeable types of debt. Filing a petition for bankruptcy does not guarantee that all your debts can be discharged. Unsecured debts like credit card bills and medical bills are examples of dischargeable debts. On the other hand, secured debts, child support, alimony, tax debt, and student loan debt are the types of debts that are non-dischargeable.
Before filing bankruptcy, it is important to consult a bankruptcy attorney regarding which bankruptcy chapter will be suitable for your situation. The commonly used types of bankruptcy chapters are Chapter 7 (liquidation bankruptcy) and Chapter 13 (reorganization bankruptcy). When filing Chapter 7, an assigned bankruptcy trustee will evaluate your case and manage the sales of your nonexempt assets. The funds will then be allocated to creditors.
In bankruptcy Chapter 13, you will be allowed to keep your properties as long as you are paying your debts to lenders. When filing Chapter 13, you shall negotiate a debt repayment plan that will help you in making payments to debt collectors. When you file bankruptcy under this chapter, you may also stop wage garnishment, foreclosure, and repossession.
Filing a petition in bankruptcy allows you to have a fresh start with your finances. Note, however, that in a bankruptcy filing, there are advantages and disadvantages. It is highly recommended to seek legal help from an experienced bankruptcy lawyer who will help you understand bankruptcy law. He or she can explain the different bankruptcy forms and will assist you on how to file a bankruptcy petition. Bankruptcy attorneys will help you throughout the bankruptcy process to avoid any legal issues during the actual proceeding.
What are the advantages of a bankruptcy filing?
One immediate benefit you get when you file for bankruptcy is an automatic stay. An automatic stay is a motion that warns creditors not to attempt collecting money from debtors. Debt collectors are not permitted to make phone calls and emails that demand you to pay off your debts. This may also stop wage garnishment and repossession of properties and protect you from creditor harassment.
The greatest advantage when you file bankruptcy is obtaining a bankruptcy discharge. It means that it will not be necessary for you to repay certain debts. This depends on the type of bankruptcy that you are filing (Chapter 7 or Chapter 13).
In addition to the above, declaring bankruptcy will help you rebuild your financial future. Dealing with debt and financial problems is not easy. Through bankruptcy filing, you may obtain debt relief and you may improve your current status through financial management.
What are the disadvantages of a bankruptcy filing?
The major disadvantage of filing bankruptcy is that it cannot eliminate all types of debt. It cannot wipe out debts such as mortgage payments, certain tax debt, student loan debt, child support, and alimony. In extreme bankruptcy cases involving student loans, it may be forgiven under certain circumstances. However, it is more likely that it will not completely be discharged even when you file bankruptcy. Also, when filing bankruptcy, a debtor may lose certain nonexempt assets when a judge requires these to be sold.
When you declare bankruptcy, the filing may also affect your credit report. Although your credit score may already be poor due to late payments, credit reporting agencies demand that it remain on your credit report for quite some time. A Chapter 7 will remain on your credit report for up to ten years while a Bankruptcy Chapter 13 would remain for up to seven years.
Your potential ability to apply for a future loan or credit card will be hurt by this effect on your credit score. It may also have an impact on your employment or housing arrangements. Before they decide whether applicants will be accepted, certain employers and prospective landlords check an individual’s credit score.
Hire a Credible Bankruptcy Lawyer
Trying to understand bankruptcy law once you consider bankruptcy is important. Bankruptcy proceedings may be complicated and filers require legal advice from a professional. Struggling with debt is extremely stressful when you are dealing with it alone. This is why it is necessary to work with a credible bankruptcy attorney who is knowledgeable in handling bankruptcy cases and is familiar with the different debt management options.
For legal help and assistance, talk to our bankruptcy attorneys at Phoenix Fresh Start Bankruptcy Attorneys. Call 602-598-5075 and get a free consultation.