Bankruptcy Information--An Overview

Good bankruptcy information is challenging to find.

Bankruptcy is one of the most difficult, ofttimes even traumatic, decision that can be faced in life. Often due to unpredictable medical expenses, changes in employment or other unforeseen circumstances, bankruptcy is a final choice for persons who face insurmountable debt, foreclosure and other harsh financial challenges.

Bankruptcy is an unfortunate situation that can happen to anyone - from the fledgling entrepreneur to the most experienced businessman. Since the economic climate is ever changing, as is the stock market, many persons are unable to say they live in complete safety any more.

How it Works

Debtors file for different kinds of bankruptcy for different reasons. A debtor that files for Chapter 7 bankruptcy is usually seeking to discharge all of his/her debts. The average Chapter 7 case runs about 4-6 months, from petition date to discharge date.

Chapter 7 bankruptcy is often the more appropriate choice for those whose debts, such medical bills and credit card debt, are largely unsecured. So, if you don't own many assets, your income is below the median, and the majority of your debts are not secured, Chapter 7 bankruptcy might be your best choice.

Usually, a debtor who files Chapter 13 is employed and is seeking to retain his assets while entering into a payment plan with the bankruptcy court to help pay off his creditors. The person will make a Chapter 13 plan, where he agrees to make timely payments to the Court for a span of three to five years. This should ensure the debtor sufficient time to pay back the agreed upon debts.

Chapter 11 bankruptcy filings are sometimes considered "strategic". In other words, management may wish to reorganize their finances for strategic purposes, not simply for the sake of balancing books. Chapter 11 is reorganization, not liquidation. Debtors can "emerge" from a chapter 11 bankruptcy within several months or within a few years, depending on the amounts owed and complexity of the bankruptcy.

Plans

In all cases of bankruptcy, plans are presented, creditors vote, and the court makes many reviews until a verdict is reached. If the plan cannot be be agreed upon, the court can either liquidate the business under Chapter 7 or dismiss the case.

If your plans are accepted, creditors are assigned priority by the court. As soon as your assets are distributed, you will be free from most of your obligations, even if your debts are not all paid off. Creditors are repaid according to the amount they accept. The smaller the settlement, the quicker they will be paid.

Conclusion

Bankruptcy can be a real stress relief if you are in a desperate situation, but it is necessary to realize how you got to this point. If you declare bankruptcy and then continue without changing your spending habits, you are destined to wind up in the same situation all over again.

Declaring bankruptcy is not an easy decision, but we can help you sort out your options, review potential alternatives, and then make a decision about where you might go from here.

It is a legal opportunity to get a new start.