Are your bills piling up in the living room? Are you using your credit and debit cards to pay for your coffee and groceries every day? Have you started losing track of your debt and how much money is due? If your answer is yes to any of these, then it’s probably the time for a fresh start. As an individual or a company, this is your call to file for bankruptcy to pick up the pieces and start over.
Bankruptcy, in simple words, is the legal procedure for people or businesses to break free from their debts. Bankruptcy exempts individuals and businesses from debt or helps them pay it off. In this process, you are referred to as the debtor – which means the borrower. Whereas the creditor is the lender. As a debtor, a person who owes money to an individual or entity, you file a bankruptcy petition.
Types Of Bankruptcy
If you live in San Diego, CA, you’ve probably noticed the rising numbers in bankruptcy declarations. If you live in California, where business debts are high, you might want to read up on the types of bankruptcy and how they can benefit you. There are different types of bankruptcy, also referred to as chapters. The most common ones are chapter 7, 11, and 13. Each chapter has pros and cons, and therefore, the attorneys at https://tlbrownlaw.com/practices/bankruptcy-attorney/ advise that you consult a reputable lawyer to guide you through the process. This is because improper or missing paperwork can have fatal consequences like dismissing your case from getting discharged.
Chapter 7 helps people get rid of their unsecured debts, such as medical bills, personal loans, and credit card balances. Nevertheless, there are some forms of ineligible debts, such as child support, alimony, court judgment, student loans, and back taxes. As we previously mentioned, there are downsides to each form of bankruptcy; Chapter 7 will hinder you from getting credit, as it stays in your credit records for 10 years.
Chapter 11 is commonly filed for businesses that want to remain in the game. In other words, help them get the business up and running to gain profits again. Chapter 11 bankruptcy helps a company reorganize and layout plans to cut down costs and improve its revenue. So, it helps businesses carry out their activities without interruption while paying their debt under court supervision.
Chapter 13, also referred to as a wage earner’s plan is for those individuals and businesses who don’t qualify for chapter 7 bankruptcy. It is suitable for those who have a consistent income and make more money than those who file for chapter 7 bankruptcy. The privilege here is that these individuals or businesses get to pay off their debts in installments over 3-5 years, without disposing of their assets or properties.
There are other bankruptcy chapters provided by law, such as chapters 9, 10, 12, and 15. As chapter 7 is the most common form of bankruptcy, it is important to know the necessary steps you need to undertake to file for chapter 7. When you file for a chapter 7 bankruptcy, you’re basically selling off your assets to pay your debts; hence, it’s important to be careful during the process. So, without further ado, let’s delve into the right way to file for a chapter 7 bankruptcy.
- Do Your Research
Reading online that chapter 7 is the fastest and most common type of bankruptcy does not mean that it is right for you. This is because, as we mentioned, some forms of debt are not dischargeable with Chapter 7 bankruptcy. So, you need to make sure that you are eligible and that you qualify for it. For example, if your gross income is more than that of a median family of the same circumstances in your state, then you are deemed eligible. However, if you’re not, then you may not pass the mandatory means test for filing Chapter 7 bankruptcy.
- Attorney And Credit Counseling
You must complete a credit counseling course from a qualified nonprofitable agency before filing for bankruptcy. Notably, this form should be completed within 180 days before filing. Then, you need to get yourself a lawyer because this is not something you should wing your way out of. It may not seem like a handy solution to pay an attorney to get you out of debt, but it is the safest way to go. Otherwise, you might end up dismissed for incomplete or improper paperwork.
- Trustees And Creditors
After getting your lawyer to file your petition and paperwork, a bankruptcy trustee appointed by the court will take over to manage the process. Then, you’ll have to meet your creditors to answer questions about your bankruptcy situation. This meeting will be arranged by the trustee for you, your lawyer, as well as your creditors. Consequently, the trustee will decide whether you’re eligible for Chapter 7 or not.
- Redeem, Reaffirm, or Surrender
In case you have secured debts- money owed to a creditor in the form of real property, such as land or a house, you need to decide whether you’re going to redeem, reaffirm, or surrender your secured debts. Redeeming your property means to pay the creditor the value of the property in a single payment or a lump sum. Reaffirming your debt is basically agreeing to keep paying the creditor as per the contract, which normally falls under the same terms of redeeming a property. Finally, to surrender your property means allowing the creditor to take it.
- Education Course And Discharge
After filing your paperwork, you need to complete a debtor education course from a qualified nonprofitable credit counseling agency. Make sure you submit your certificate on time, or else you won’t be discharged. Three to six months later, there will be a court order to discharge you of your qualified debts, which means that you no longer have a legal obligation to pay them off. Shortly after your case will be closed.
We do know that the word bankruptcy is dreadful to digest and that the media stigmatizes every successful figure going bankrupt as if it was the end of the world. However, as cliche, as it sounds, there is light at the end of the tunnel. With the right lawyers, you can go through the process with minimum losses and get your fresh start.