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Do I Need a Bankruptcy Lawyer?
Whether you are filing chapter 7 or chapter 13, bankruptcy can be a complicated process. It is vital to know how the law regulates bankruptcy in your state, including what property exemptions you can claim. A lawyer knows the ins-and-outs of filing for bankruptcy, and can recommend what chapter of bankruptcy is right for you.
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Disclaimer – The information on this page is provided for educational purposes only and it should not be taken as legal advice. You should consult a qualified attorney regarding the options available to you.
What is Bankruptcy?
Bankruptcy is a court process that allows an individual or business to get relief from their debts. The ultimate goal of bankruptcy is to give the individual or business a fresh financial start while being fair to the creditors.
How Can a Consumer File for Bankruptcy?
There are two ways an individual consumer can file for Bankruptcy: Chapter 7 and Chapter 13. Once bankruptcy proceedings are started (whether through Chapter 7 or Chapter 13), creditors cannot attempt to collect debt from the individual until the bankruptcy process has ended.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is often called "liquidation bankruptcy." This process starts when a petition is filed with the bankruptcy court detailing the individual's property, debts, and financial situation. The court then appoints a trustee who determines which, if any, of the individual's property must be sold off to pay their debts.
Much of the individual's property is not sold. This property is called"exempt" property. Exempt property may include homes, vehicles, personal property, insurance policies, and retirement accounts. Check with a local attorney for exemptions in your area.
Many of the debts will be"discharged," meaning that they will not have to be paid. Some debts, however, are not dischargeable, including:
The bankruptcy process is complete once all the debts have been either paid or discharged.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy allows an individual to pay off his debt over time. The process starts when the individual files a petition with the bankruptcy court. This petition includes a complete list of all the individual's debts and assets. Additionally, the petition must include a payment plan that describes how the debt will be paid off over the next three to five years.
The court then appoints a trustee who will review the payment plan. The trustee has the power to approve or reject the plan. Once the payment plan is approved, the debtor must make monthly payments to the trustee, who will distribute those payments to the creditors as laid out in the payment plan.
Once the payment plan has been completely fulfilled, the individual is out of bankruptcy.
Chapter 7 bankruptcy is best for people who:
Chapter 13 bankruptcy is best for people who: