Bankruptcy is a legal proceeding that occurs when an individual or business cannot repay debts, and there is not another option to satisfy the collection effort. Although this process may devastate an individual or business’s credit for several years, it will lessen the immediate embarrassments and stresses of bill collection and unpaid debts.
Bankruptcy may become a process that is tedious and difficult to overcome. There are numerous state regulations, exemptions and forms that must be completed to fulfill a lawful statement of bankruptcy. A lawyer can not only assist in completing the necessary paperwork, but can also help choose which Chapter of bankruptcy best fits your financial situation.
There are four types of bankruptcy under law:
Chapter 7 – This type is referred to as ‘liquidation’ or ‘straight’ bankruptcy. In Chapter 7, the individual in debt is to liquidate all properties that exceed exemption limits, to pay off collecting creditors. With straight bankruptcy, a petition to the court is filed to eliminate all debts, in exchange for your property. Chapter 7 can only be filed six years after the date of the previous filing.
Chapter 11 – This type of bankruptcy is mainly used by businesses. Very few individuals file Chapter 11 bankruptcy. Although, if a debtor has an extremely large amount of debt, a lawyer may refer this option.
Chapter 12 – This chapter of bankruptcy is reserved only for family farmers.
Chapter 13 – Chapter 13 bankruptcy requires a debtor to create a payment plan for which to repay collectors of unpaid debts. With this, collectors will receive their payments from substantial withdraws from a current income. This chapter will allow an individual to keep property such as a house or vehicle, which may be lost in other bankruptcy filings. The court system must accept your payment plan, for the filing to take place. Chapter 13 bankruptcies can be filed at any time, without a waiting period between filings.
Any of these filings can take between seven to ten years to clear from your credit record. It is important to attempt to rebuild your credit score, while these claimant years take place. Beware of fraudulent advertisements for an easy rebuild of credit. There is not a simple fix to starting a fresh credit report, although with time, your credit may be stronger than it was initially.
There are several financial problems that bankruptcy cannot cure. To name a few: child support, alimony, criminal fines, some taxes and variant student loans. Debts that also occur after bankruptcy has been filed will not be cleared after the filing has been submitted. Also, if anyone has co-signed on an individual’s loans or unpaid debts, the co-signer may have to repay the debt completely.
There is much information to gather before and after filing for bankruptcy. Although bankruptcy may assist with the financial problems of the moment, there is much that makes up a lawful bankruptcy filing. As always, it is in your favor to understand the law and its requirements.
Steven Medvin is the Executive Director of SMP Advance Funding, LLC, which provides lawsuit funding to individuals who need a lawsuit loan for pending lawsuits. For more information please visit: http://www.smpadvance.com