Bankruptcy: A Fresh Start
The term bankruptcy is daunting, conjuring fears of poverty and financial ruin. In reality, bankruptcy can help in a time of great need for you, your family, or your business. By filing for bankruptcy, a person can liquidate their assets to repay creditors or enter into a repayment plan.
There are two basic types of bankruptcy that are most helpful to people in financial straits. Chapter 13 bankruptcy is more commonly referred to and explained as debt consolidation. Chapter 7 is what people generally think of as full bankruptcy in which all debts are discharged.
People who choose to file for Chapter 13 bankruptcy are generally able to repay debts to their creditors, but need time and the means to reorganize their finances. Debt consolidation lets debtors pay back most or all of their debt to creditors over a period of 3 to 5 years. This usually allows the debtors to keep any property they might otherwise have forfeited to pay for the debts.
Chapter 7 bankruptcy, or straight bankruptcy, is when the victim has no way to pay off the debts they owe. After a Chapter 7 has been filed and approved, a Discharge is ordered for the debts of the filer. This is a court order that prevents creditors from taking action to collect the debts such as wage garnishing or filing a lawsuit.
If a business attempts to file Chapter 7 bankruptcy, then all of its assets must be liquidated to pay the debts, as they cannot be discharged. For a business, filing Chapter 11 bankruptcy may be the best option. It differs from Chapter 13 bankruptcy, in that debtors do not typically have a regular source of income to pay off the debts over time.
Filing for bankruptcy is often the best and only option available to people who have gone into debt and are unable to pay their bills. Debtors who find themselves in this situation are advised to contact Brock and Stout for legal assistance.