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The Reality of Bankruptcy

When life hits a roadblock of economic downturns, with your personal finances spiraling down, your business failing, and your debt continuously collecting, you may wonder how you could save yourself from more trouble. As a last resort, bankruptcy may be your only option left. It sounds scary, and bankruptcy can be a daunting process, but in many situations it is the most reasonable course of action.

Filing for bankruptcy means going through a legal process of examining the assets of an individual or business who cannot repay their debts to creditors, and seeking relief from some or all their debts. The decision to utlimately discharge the debts will be determined by the courts.

Filing for Bankruptcy

If you've decided to file for bankruptcy, the first step is to seek consultation with a bankruptcy lawyer. We can help pair you with a suitable attorney who is right for your particular financial situation.

Once you file for bankruptcy and your case enters the court, you are automatically protected from your creditors seeking to collect debt. This is called Automatic Stay, which is a legal protection a filer receives. It will remain in effect until the court rules.

Most cases usually result in the discharge of debt. The times that a case would result in not being qualified for bankruptcy is when the court rules the debtor has enough funds or income to pay off the debt.

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Types of Bankruptcy

Filing for a bankruptcy allows you to reduce, reconstruct, or eliminate your debt if qualified. There are multiple types of bankruptcy, but the most common cases are filed under Chapter 7 and Chapter 13 bankruptcies. Often, the ones filing for bankruptcies are individuals or people, rather than businesses, due to overwhelming loans and other financial responsibilities they've taken, such as a mortgage, car loan, or student loan. These types of cases are usually Chapter 7 or Chapter 13. Many law firms connected with Lawyer One handle these types of cases.

Chapter 7 - Liquidation

In a Chapter 7 case, also known as Liquidation, your non-exempted property will be listed and will be sold off by a court-appointed bankruptcy trustee, in which the proceeds will be used to pay your debt. You are permitted to keep exempt property, such as your home, car, Social Security, pensions, welfare, and other public benefits, which are protected from the collection of creditors. Non-exempted property can be stocks, bank accounts, a second home, and recreational vehicles.

Anyone who files for Chapter 7 needs to pass the means test. The debtor must have an income less than the median income in their state in order to pass the test and qualify. Chapter 7 is the type of bankruptcy that most often occurs.

Chapter 13

In a Chapter 13 bankruptcy case, a filer will petition and create a plan of repayment in a period of three to five years. This is usually for people and businesses who wants to keep their assets and property, or those who do not qualify for a Chapter 7 because their income is greater than the median income in the means test. The repayment plan created is based on your income and how much you can pay in three to five years; and after you complete the plan, the rest of the debt will be eliminated.

Bankruptcy Frequently Asked Questions (FAQ)

Should I File for Bankruptcy?

In a capitalist world, whether it is due to bad business decisions, unluckiness, or collapse of the economy, there are laws that allow those drowning in debt a second chance to start over. People who file for bankruptcy are usually those who rack up more debt than the income they make, those who keep repaying but making no dents to their debt. For many, bankruptcy may be the best or only way to deal with their financial situation.

Keep in mind that filing for bankruptcy is usually a last resort, when all other options have been exhausted to save you from debt. Meeting with a consultant, usually a bankruptcy attorney, can help you weigh out the pros and cons before deciding if bankruptcy is the right way for you.

While declaring bankruptcy may be the only option for some people, it does pose heavy consequences in the long term. Bankruptcy negatively affects your credit score and will stay in your credit history for seven to ten years, depending on the type of bankruptcy. Your past debts also won't be erased even if they are discharged after bankruptcy. It will also be harder to apply for future loans, and it could even affect your chance of getting a job, an apartment or house. However, it may be worth taking these risks by declaring bankruptcy, instead of staying in debt forever because in time, credit score and all those other factors can be built back up again.

Who can file for bankruptcy?

Anyone! Whether you're the CEO of a large corporation that's been impacted by bad economy, or you're a small business owner struggling to make ends meet, or you're someone drowning in debt, you can obtain a new financial start by declaring bankruptcy.

Which kind of case should I file for?

There are different types of bankruptcies for different situations. The most common types are Chapter 7 and Chapter 13. Chapter 9 bankruptcy deals with the debt of cities and towns. Chapter 11 bankruptcy is mainly for businesses and large corporations; it is known as the "reorganization of bankruptcy" or reconstructing the debt while business continues to operate. Chapter 12 bankruptcy deals with the debt of "family farms" and "family fishermen". Chapter 12 bankruptcy deals with international insolvency cases, in which the debtor has debts in the United States and in another country.

What is the process of filing for bankruptcy?

Dealing with bankruptcy is tough, but here are some basic guidelines:

Compile all of your financial records, which includes your debts, assets, income, and expenses.

Consult with a bankruptcy counselor from an approved provider from the U.S. Courts website. They explore all other options before deciding that bankruptcy is the only option.

Consult with Lawyer One to find an appropriate attorney for your situation to proceed with the filing and the rest of the bankruptcy process.

Why use Lawyer One?

Every story is unique and Lawyer One can find you the right bankruptcy lawyer to handle your situation. Our law firms have the experience helping thousands of clients improve their financial situation.

We Can Help

Lawyer One is connected with hundreds of the most trusted and highly experienced law firms around the country with top-notch bankruptcy lawyers and attorneys who can provide sound legal advice and represent you in court. Every attorney and lawyer will go through with you every step of the bankruptcy process, from providing legal advice, to documentation and filing, and to the court proceedings.

COVID-19 Response

The crisis of the COVID-19 pandemic around the globe has not only impacted our health and safety but also our economy, with 10 million people filed for unemployment in United States when the nationwide shutdown March 2020 alone. With unemployment continuing to rise, many companies and businesses, especially small and local businesses, have been struggling to make ends meet and are forced to declare bankruptcy.

Whether you’ve lost your job or your business has failed due to COVID-19, and are seeking bankruptcy, our lawyers and attorneys are here to support you more than ever. The bankruptcy courts had to make changes in light of the pandemic. While physical court proceedings have closed, anyone can still file for bankruptcy. Many law firms across the country have set up guidelines in dealing with the new rules according to the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act. It is highly recommended to check with your lawyer or attorney for your situation.

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