Bankruptcy - What You Need To Know Before Filing
When there's no other way for you or your business to remain afloat, then you should consider filing for bankruptcy. It offers businesses and individuals alike a fresh start while providing the opportunity to settle all fiscal obligations by legal means.
Each of the bankruptcy laws in the Bankruptcy Code possess particular parameters that must be fulfilled for debt to be considered discharged. It takes experienced knowledgable bankruptcy attorneys to successfully navigate the bankruptcy process to its conclusion. The bankruptcy process varies with the different kinds of bankruptcy and a good bankruptcy attorney can help discover credit repair options following the bankruptcy process.
The fundamental kinds of bankruptcy are liquidation (chapter 7) and debt repayment (chapter 13) for individuals, family farmer or fisherman (chapter 12), and reorganization (chapter 11) for businesses.
Chapter 7 — (Liquidation)
Chapter 7, aka “straight bankruptcy,” assures payment of debts through assets owned by an individual debtor. The process is as follows: property, equipment, and other assets owned by the debtor are turned over to a court appointed trustee for the purpose of evaluating its worth. If the assets are assessed and their worth is known, they are liquidated into cash and the cash is used to pay the debtor’s different creditors.
Once a chapter 7 is filed, a stay order is issued by the court and the debtor’s creditors cannot contact the debtor directly. While the stay is in effect, creditors must deal with the debtor’s lawyer to discuss any legitimate financial concerns they might have. A few months after the bankruptcy filing, the court issues a discharge proclaiming that a chapter 7 bankruptcy was filed on behalf of the debtor. At that point, the debt is formally discharged.
Chapter 13 — (Payment Plan)
An individual debtor can opt to file chapter 13 bankruptcy. Chapter 13 allows a debtor to repay his or her debt over a 5 year period. Chapter 13 plans must be submitted and approved by the court. After successfully making payments for 5 years the debtor is given a discharge.
Chapter 12 — (Fisherman)
Fishermen and family farmers who wish to utilize their future earnings to repay outstanding debts may file a chapter 12 bankruptcy. Chapter 12 is specifically tailored for these types of individuals in mind.
Businesses — Chapter 11 (Reorganization)
Struggling businesses are given an opportunity to remain operational through the filing of chapter 11 bankruptcy. Chapter 11 affords businesses that are not performing well extra time to repay their debts. The extra time afforded by chapter 11 bankruptcy allows business owners to redirect their attention to other important business matters (e.g. implementing more efficient methods for handling fiscal obligations). A chapter 11 can pull a corporation from the financial predicament its in and allow its doors to stay open but it requires a reorganization of the company. Revenue earned through reorganization is utilized to settle the debtor’s debts.
Chapter 11 bankruptcy is a very complex procedure seeking the advice of competent legal counsel is highly recommended.
Call Wessler Law Firm today to speak directly to an attorney for a free, no obligation, consultation. We'll help save your home or business, and can get you the fresh start that you deserve.
Wessler Law Firm is a small family owned law firm specializing in bankruptcy law since 1982.
Disclaimer: This article is meant for reference only, and is not intended to be legal advice.
For legal counsel regarding your situation, please consult an attorney licensed in your state.