Bankruptcy: Helping People Regain Control of Their Financial Future
In the website of Erin B. Shank, P.C., it is said, “Dealing with financial problems can be draining – physically, mentally, and emotionally. There’s not enough money to make ends meet… and worse, you’re getting phone calls from creditors day and night, wanting to know when you’re going to pay them the money you don’t have! The longer it goes on, the worse you’re bound to feel. Sooner or later, something has to change.”
The context mentioned above of is one scenario thousands of Americans find themselves in. For like a chronic disease that develops and worsens over time, so too do debts, becoming too overwhelming that these become impossible to settle.
After six months of failure to make payments, particularly to banks and credit card companies, a person’s loan or account would be considered as bad debt and would be referred to an agency which, in turn, could (and many do) resort to harassing tactics to make him/her pay.
Crushing debts have caused many individuals so much worry and stress; these have even affected family and professional relationships, many of which ending up destroyed. Debts, however, are not unsolvable problems, for the law offers legal alternatives to enable individuals to address their debts and regain control of their financial situation. One such legal alternative is bankruptcy, which is a legal declaration of one’s inability to settle personal or business loans. Besides enabling a person to regain control of his/her financial life, bankruptcy also offers the immediate effect of stopping all attempts by collecting agencies to collect debt payments as soon as bankruptcy is filed in court (this immediate effect of bankruptcy is called the “automatic stay”). Creditors will also lose any right to have a debtor’s salary garnished or his/her bank account levied.
There are different Bankruptcy Chapters available. A person, with the help of a seasoned bankruptcy lawyer, may be able to understand what bankruptcy really is, its effects and which specific chapter to apply for. The different chapters of bankruptcy include:
- Chapter 7 bankruptcy – a liquidation bankruptcy wherein a court-appointed trustee sells some of the “non-exempt” assets and properties surrendered by the debtor (there are exempt properties, like the home, which the debtor can keep and protect). The proceeds from the sale are distributed to the creditors and the remaining amount (if there is any) will be returned to the owner. The debts to be paid in this chapter are the non-dischargeable debts (usually government-related debts). Debts from which the court can decide to free the debtor can include credit card bills, medical bills, past utility bills, personal loans, and so forth.
- Chapter 11 or business bankruptcy – allows the business firm to either restructure its finances (repayment plan) for more affordable payments, or liquidate some of its properties to be able to pay creditors. Unlike in chapter 7, wherein a business will have to cease operations, chapter 11 allows a firm to stay in business.
- Chapter 12 – is designed for family farmers and family fishermen which should have a regular annual income to be considered eligible under this law. which own and operate the fishing or farming business; which own at least 50% of the farming/fishing business; and, which earns a regular annual income.
- Chapter 13 – which is reorganization or restructuring bankruptcy, requires debtors to design a debt payment scheme spanning to three years (can be five years if the court so allows). Under this chapter, all of the debtor’s properties are saved or never sold.
A realistic and objective assessment of a debtor’s financial condition is required regardless of the chapter of bankruptcy a debtor wishes to file. Making sure, therefore, that the lawyer, who you will hire will be able to defend your rights and interests well.