Important Information About Filing Bankruptcy

By Danielle Galloway


Filing bankruptcy is certainly not an enjoyable experience for anyone. However, in many cases it is one's only option. If an individual is being contacted on a continuous basis by collection agencies and creditors, but knows that he or she cannot reasonably hope to satisfy the outstanding debt, bankruptcy may be a suitable option.

Going bankrupt voluntarily is defined by the US legal code as a procedure whereby an individual or business can discharge debts by declaring that they have absolutely no way to satisfy their creditors' demands. The process can also occur involuntarily. When this is the case, creditors are given permission to force individuals who have borrowed funds to answer for their failure to repay the money. In both instances, filing takes place under one of two Titles: Seven or Eleven.

Personal bankruptcy is typically filed under Chapter 7, during which the person's property and belongings are liquidated and distributed to his or her creditors. A person may also decide to file under Chapter 11, which is a bit different from the aforementioned process. Chapter 11 offers the filer the option of paying off certain loans with future income, while entirely discharging others.

Businesses usually go bankrupt under Chapter Thirteen. Title 13 allows entrepreneurs to maintain their business and restructure it while paying off some of their debt. It is always wise for individuals or businesses to avail themselves of the services of a lawyer prior to beginning such proceedings. This is because the laws concerning the numerous options often change without much warning.

The reason this process was designed was to end the checkmate between borrowers and lending institutions. This is because in certain cases, borrowers have no reasonable hope of being able to satisfy the demands of the establishments to whom they owe money. However, bankruptcy should not be regarded as a way for a borrower to ignore his or her financial responsibilities to various creditors. Rather, the procedure was created to provide those whose situations are hopeless with a way to maintain their households, while offering a certain amount of compensation to their creditors.

The primary benefit for those who go bankrupt is the discharging of unsecured debts. Further advantages include the cessation of collection activity: creditors and lenders must refrain from pursuing the filer once he or she has begun the bankruptcy process. Another benefit associated with bankruptcies is that most consumers can eventually improve their credit score, as a significant reduction in the number of open accounts in their name typically occurs after the process is complete.

Even though the process of going bankrupt can be handled without legal assistance, this is not generally a good idea for most individuals. When represented by an attorney, most petitioners feel much more confident. It is important to choose a firm that has extensive experience with bankruptcy court, as this helps to ensure a positive outcome.

Many lawyers offer free consultations during which an individual can obtain advice and ask questions. If the attorney seems disinterested or only gives vague answers, one may wish to consider another professional. It is important to remember to discuss aspects such as fees, and how long the attorney anticipates the process will take. Regardless of one's reason for filing bankruptcy, he or she will discover that the situation will be much less stressful when turned over to an experienced legal professional.




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