Is Bankruptcy The Answer?
There may not seem like there are many options available to a person that is in a great deal of debt. One of the last resorts that actually may be a saving grace is bankruptcy. In the past, bankruptcy has been associated with negative thoughts. The thoughts surrounding a person who has gone bankrupt is someone who is irresponsible and in the poor house. This is not the case, especially in these difficult economic times. More and more people are deciding to claim bankruptcy in order to get a fresh start. It is not always an easy decision, but sometimes it is the only option left.
Basically, bankruptcy tells creditors that debt repayment is not possible. Most people will need the help and guidance from one of the many available bankruptcy attorneys. When a claim is approved, a person becomes free of their burdening debt. Before discussing the bankruptcy process, it is important to understand the differences between the types of bankruptcy that exists.
Two of the most common forms of bankruptcy is Chapter 7 bankruptcy and Chapter 13 bankruptcy. Chapter 7 is meant for individuals who are searching to start fresh financially. It is associated with the process of liquidation, since a person must free up assets that cannot be protected by exemptions to start over. To file for Chapter 7 bankruptcy, a petition must be filed in court and a filing fee must be paid. All student loans, parking violations, and divorce settlements must be paid. The individual must meet income requirements to qualify. The time frame for the process will normally take four to six months from the beginning until the end. It is essential to understand that a person can only file for Chapter 7 once every eight years.
Chapter 13 bankruptcy is filed for different reasons. It is a process of reorganization and commonly used to keep a house from being foreclosed on, to consolidate debt, and to halt IRS collection. To begin, the person must file a petition with the court and pay a filing fee. All student loans, parking fines, and other debts can be included in the plan for repayment. Once again, there are income requirements that must be met in order to qualify. Chapter 13 repayment usually lasts for five years and there is no limit on the number of times a person can file.
There are many reasons that a person may feel the need to file for bankruptcy. One of the biggest reasons that people file these types of cases is because of mounting medical expenses. Injury or a serious illness can lead to tons of medical bills that quickly wipe out a person’s life savings. After all sources of income have been used up, bankruptcy is the only option left. Another reason to file bankruptcy is because of a job loss. When a household suffers a large loss of income, it can be devastating, especially when there is no emergency backup. The cost of insurance and living in general may drain the little money that still exists. Many times, people who are unemployed lean on credit cards to pay the bills. This is yet another reason for many bankruptcies. Alongside those who use credit cards to pay bills that they cannot afford, there are those individuals who have trouble controlling what they spend. Minimum payments build until they are too high to pay. Divorce is another item that can bring financial problems onto a person. Besides legal fees, splitting the marital assets, and paying support, there may be no other recourse but to file for bankruptcy. One final reason that may lead a person to bankruptcy is losing property because of a natural disaster. Oftentimes normal homeowners insurance does not cover damages due to floods or earthquakes. In times like this, a person may have lost both their home and everything else that they own. The only way to recoup is to go bankrupt.
When contemplating bankruptcy, it is always best to have a qualified lawyer handling the case. Bankruptcy attorneys specialize in situations that help a person get rid of or reorganize debt. These lawyers have many duties to their clients. During an initial consultation, a lawyer should answer all bankruptcy questions, get a feel for the financial situation, and discuss the options that are available to help meet final financial goals. After retention, a lawyer will accept all collection calls. They begin to prepare the petition which includes many forms and complete filing it in court. After the petition is filed, there is a meeting with creditors. A lawyer will help in preparation for the questions that may be asked of the client. All bankruptcy lawyers negotiate, review, and sign agreements on property that a client intends to keep under Chapter 7, such as a house or an automobile. The lawyers also must file any other motions as they are required such as a redemption motion which lowers auto payments or avoids liens on property. In Chapter 13, the lawyer will attend a confirmation hearing to approve a plan. They also must file any other motions that are needed.
Bankruptcy does not have the negative stigma attached to it that it once had. Today, many people are experiencing financial hardship and need a platform to help them get back on their feet. Everyone makes mistakes, so there is no need to be punished forever. It is important to use bankruptcy as a learning experience to correct past mishandlings. Also, getting sick or hurt should not mean financial ruin because of skyrocketing medical bills. Do not hesitate to consult a lawyer who can better explain the process that is involved and recommend the best option for a positive outcome. It may be difficult to come to terms with the idea that drastic help is needed to escape debt. However, this is the reason that the government has developed a way to protect both normal citizens and creditors. Instead of viewing bankruptcy as something bad, it may be the biggest mistake not to take advantage of a second chance.