WHAT IS BANKRUPTCY
Bankruptcy is situation where a person or business declares that they are unable to pay back their debts. Whenever a person or business has liabilities that exceed their assets and who also lack a sufficient income, they will be considered bankrupt. Any business or individual that faces the situation of being financially insolvent will need to find a way to either get rid of their debts or find a way to manage them more easily. In this situation, a person or business will want to file bankruptcy.
WHY FILE BANKRUPTCY
There are a couple of reasons why it is a good idea to file bankruptcy. The main reason why anyone would want to file bankruptcy is to eliminate their debt and start fresh. Another reason to file bankruptcy is to restructure debt in order to make payments that are more manageable. Individuals and businesses may also want to eliminate a portion of their debts so that they can focus on paying ones that are more significant. These can include a mortgage for individuals and a loan used to finance employee payroll for a business.
WHEN TO FILE
Whenever a person or a business is looking into filing for bankruptcy, they will need to determine when they want to file. Anyone can file for bankruptcy at any time when they have debt. However, they need to make sure that they qualify. Individuals need to pass a means test in order to be eligible for filing bankruptcy. Once the means test is passed, then a person can file bankruptcy. It is a good idea to file bankruptcy when you know that your income and assets are insufficient to pay back the debts in a reasonable timeframe. It is also a good idea to file bankruptcy when you conclude that rearranging debts will allow you to make payments more affordable.
There are two main types of bankruptcy for individuals. These include Chapter 7 and Chapter 13. With a Chapter 7, a person can elect to have their debts discharged and no longer be liable for any of them. With a Chapter 7, a person will need to surrender all nonexempt assets to a trustee in order to satisfy secured debt obligations. For those who have debts that are not secured, they will need to provide non exempt assets to the trustee as well. However, anyone who doesn’t have any non exempt assets, will get a complete discharge.
A Chapter 13 bankruptcy is one where a person elects to have certain debts eliminated so that they can pay back other debts at more affordable terms. They will also be able to get a Chapter 13 bankruptcy to lower their payments on current debts as well. A Chapter 13 is beneficial when a person is looking to keep assets such as a house or a car and make the payments lower and more affordable.
HIRING A BANKRUPTCY ATTORNEY
Those who are looking to file for bankruptcy will benefit most by hiring a bankruptcy attorney. A bankruptcy attorney specializes in handling bankruptcy cases. This lawyer will evaluate your situation and provide you with recommendations on how to complete the bankruptcy process. They will explain to you about the differences between Chapter 7 and Chapter 13. Bankruptcy attorneys will also make arrangements with the trustee and file all of the necessary paperwork to file for bankruptcy.