Bankruptcy is a legal proceeding that enables an individual (or a company) to have their debts discharged. Before filing, it is best to consult with a bankruptcy lawyer for you to know your options. There are several types of bankruptcy and the bankruptcy case you will opt for will largely depend on your situation.
When declaring bankruptcy under Chapter 7 (also called liquidation) you are to liquidate certain assets will pay off your debts. Secure debts are often prioritized over unsecured debts. Meanwhile, when filing bankruptcy under Chapter 13 (also known as reorganization), you reorganize your debts and propose a repayment plan. In most cases, you are to repay your creditors in a period of three to five years (it depends on your monthly income, relative to the state median). A creditor payment plan schedule longer than five years is prohibited by the federal court. Following federal bankruptcy laws, this type of bankruptcy is generally applicable to those with secured debt and unsecured debt that is below a certain amount. In these circumstances, a trustee will oversee the bankruptcy proceeding.
Early into the bankruptcy process, a bankruptcy trustee is the one who determines if there are no sufficient agencies that can provide the required credit counseling.
When you file for bankruptcy, make sure you do not rush in any of the steps you need to take. Fill-out bankruptcy forms carefully. Trusted bankruptcy lawyers help tremendously with this. Make sure you include detailed debt and financial information. Prepare a list of every creditor you owe and how much you owed from each (regardless if it is a secured or an unsecured debt). The fate of your bankruptcy petition will also largely depend on your monthly income and monthly living expenses, so make sure to document those well.
Bankruptcy cases are reviewed very seriously. Generally, bankruptcy courts require the following documents in every bankruptcy filing:
- schedule of assets and liabilities
- current revenue
- unexpired rentals
- financial statement
A bankruptcy attorney can help you with these and other paperwork required under the bankruptcy code.
Immediately after filing, a bankrupt individual will enjoy bankruptcy protection from lenders through the automatic stay. Following bankruptcy rules, an automatic stay prevents almost all collection activities. You may also save your home from foreclosure when you file for a Bankruptcy Chapter 13. To avoid being sued by debt collectors, however, you must make regular or monthly payments, following your repayment plan. Such payments are facilitated by your bankruptcy trustee. This means debtors and creditors do not necessarily have to interact anymore.
The bankruptcy clerk notifies any lender listed in the schedule of debts. It is then the responsibility of the trustee to hold a meeting between the lenders and the individual filing the petition for bankruptcy. Here, creditors can ask questions to the person who wishes to declare bankruptcy. During the bankruptcy hearing, the bankruptcy court will decide if the repayment plan proposed by the debtor shall be approved or not.
To file for bankruptcy is to have a fresh start at life. If you have questions on how to file or are going through the complexities of bankruptcy law, contact our law firm and get legal advice from trusted bankruptcy attorneys. Call us at the Northwest Debt Relief Law Firm.