Bankruptcy Law contains: 135 Articles, 152 FAQs, 5 Videos
When the burden of debt is no longer bearable, bankruptcy can be a way for consumers to get a fresh financial start in Chapter 7 bankruptcy or Chapter 13 bankruptcy, or for a business to use Chapter 7 or Chapter 11 bankruptcy. The bankruptcy law section of FreeAdvice explains the bankruptcy law basics so you can consider what debts may be eliminated, whether bankruptcy is a viable option, and if you’d benefit from the assistance of a bankruptcy attorney.
Before you file for bankruptcy, you should first decide which type of bankruptcy is applicable to your situation. Bankruptcy law is divided into two general areas—business bankruptcy and consumer bankruptcy. Business bankruptcy applies to debts associated with a business. Consumer bankruptcy is reserved for consumer debts, which relate to an individual’s household expenses. While these two types of bankruptcy may seem easy to differentiate, other factors can complicate a filing. For example, if you run a small business and you frequently commingle business funds and expenditures with your personal funds and expenses, your creditors may be able to draw your business into a consumer bankruptcy.
Within these two types of bankruptcies are splinters of more specific filings. The most common types of filings are Chapter 7, Chapter 13, Chapter 11 and Chapter 12. Chapter 7 is available to both individuals and business owners and involves a complete liquidation of a debtor’s assets to pay creditors. Chapter 13 is primarily for consumers and is structured around a repayment plan that allows a debtor to stop creditor harassment while paying off debts over a specified time period. A Chapter 11 filing is used by businesses to reorganize debt so that they can remain in operation. Chapter 12 bankruptcy is specific to family farms and fishermen in need of economic relief from debt, this is executed through a full or partial repayment plan.
What type of bankruptcy you decide to file will depend on your remaining assets. If you can afford to pay some of your creditors, you may want to use bankruptcy to restructure your debts. This means that you pay out what you can over the course of the bankruptcy. At the end of the bankruptcy, a creditor can no longer harass you to pay a debt. If you are in such dire circumstances that you simply cannot afford to repay anything, the bankruptcy court may be able to wipe out your debts completely.
A bankruptcy should be pre-planned to avoid complications during the process. Once a bankruptcy is filed, a number of troublesome issues are almost immediately resolved. Perhaps the most appealing is that debt collectors are put in check by an automatic stay. Once a bankruptcy is filed, they can no longer harass you for payment. Creditors must go through the bankruptcy court to enact their creditor rights. Failure to perfect their interest can result in a waiver of the right to collect on the debt later. If they continue to harass you for payment, they can also risk being held in contempt by the bankruptcy court.
In the past, people have abused the protections afforded by bankruptcy; in response, Congress enacted several reforms limiting the scope of bankruptcy protections. Bankruptcy is not to be taken lightly and should only be considered when other financial planning efforts have failed. While an effective tool for consumers to resolve burdening debt issues, bankruptcy is accompanied by complicated laws and filing processes and tends to be administrative in nature. Failure to comply with filing requirements can result in the bankruptcy court involuntarily discharging your bankruptcy case. Because of this, it comes highly recommended that you consult a bankruptcy attorney before diving in. A bankruptcy lawyer can help determine when to file and how to file, what type of bankruptcy is right for you, what rights you are afforded under bankruptcy, what petitions to file and when, and so much more.
Consumer groups may advertise that they are willing to help you with a bankruptcy filing, but only a licensed attorney can tell you what the law is and how it applies to your situation. Because you can only file for bankruptcy a limited number of times, you may lose an opportunity to resolve your debt issues without competent advice. Bankruptcy is a shot at getting your credit, and your life, back on track. Explore some of the FreeAdvice bankruptcy topics in the links on this page to learn about tips and strategies for effectively eliminating your debt burden.