Bankruptcy stops creditors cold in their tracks. The can’t call. They can’t write. They can’t take your stuff. It is really as powerful as it sounds.Read more
Get rid of debts. That is the reason most people file bankruptcy and it works. And that includes payday loans, no matter what the debt collectors tell you.Read more
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There are many reasons that someone might need to file a personal bankruptcy. Credit card debt, student loans, foreclosure, car repossession, and payday loans are just a few of the reasons for filing a personal bankruptcy. One study found that 80% of bankruptcies were precipitated by either divorce, job loss or a medical issue.
In most cases, you will be able to keep all of your property in a personal bankruptcy. But it is important to consult with an attorney who specializes in bankruptcy to make sure you claim the right exemptions for your case.
There are two overarching benefits to bankruptcy:
1. The automatic stay prevents creditors from taking any action to collect from you while you are in bankruptcy. Creditors cannot harrass you, call you or even write to you. It is extremely broad and there are significant penalties for violating the automatic stay, so creditors are usually very cautious about doing anything that might violate the automatic stay.
2. The discharge is the judicial declaration that you are not required to pay your debts. This is entered near the end of the case (usually) and there is a discharge injunction that prohibits creditors from taking any action to collect a discharged debt. Like the automatic stay, there are substantial penalties for violating the discharge injunction.
Types of Bankruptcy
Chapter 7 bankruptcy is where you cannot afford to pay anything to creditors and can exempt all of your property.
A Chapter 7 trustee is appointed to determine if any of your assets can be liquidated and to investigate whether you qualify for bankruptcy relief. If your income is too high, you may not be able to file a Chapter 7.
Chapter 13 bankruptcy is a court-supervised payment plan. Often, you will pay much less than 100% to creditors in Chapter 13, but this allows you to pay just the amount you can afford. You can also catch up on house and car payments in Chapter 13.
A Chapter 13 plan is better than an out-of-court payment plan, because you don’t have to negotiate with each creditor individually; you get a court order saying how much you have to pay and when you pay the required payments, and will not owe anything further.
When a business takes on too much debt or experiences a downturn in revenues so that it can no longer support the debt load that it has, it may be time to restructure the business in bankruptcy. Chapter 11 bankruptcy is a useful tool for restructuring secured and unsecured business debt.
The automatic stay in a Chapter 11 bankruptcy protects the business and allows it to continue operating without creditors attempting to collect. This gives the business some breathing room to develop a reorganization plan and to determine if that plan will be feasible. A Chapter 11 reorganization plan is flexible and can be quite complex. Once the plan is confirmed by the court, the plan becomes a new binding contract that binds the business debtor and all of the business’s creditors to follow the terms of the plan.