Bankruptcy
For people who have become overwhelmed with debt and are looking for a fresh start, bankruptcy is a viable solution. Filing bankruptcy can help those individuals decrease the amount of debt they owe, either by allowing them to liquidate their assets to pay off the debt, or assisting them in setting a manageable repayment schedule. Businesses can also benefit from bankruptcy laws….
Bankruptcy cases are handled in a federal court, and usually fall under one of three categories: Chapter 7, Chapter 11, and Chapter 13. In Chapter 7, assets are liquidated and the proceeds are given to creditors. Chapter 11 usually involves a corporation or a partnership, and facilitates the reorganization of debt to be paid back over time. Chapter 13 bankruptcy reorganizes debts for an individual. This allows the individual to hold onto their assets, and repay their debt in a certain amount of time, usually three to five years.
Although all bankruptcy cases are handled in a court of law, most people filing bankruptcy will have very little, if any, contact with a judge. In fact, the majority of the proceedings are done through a bankruptcy attorney. The only formal meeting a debtor must attend is a meeting with creditors. This meeting allows the creditors to ask questions regarding the debt, and someone filing Chapter 13 bankruptcy may have to appear before a judge at a confirmation hearing.
The modern bankruptcy law was put into practice following a decision by the Supreme Court in 1934. This decision stated, “[The law] gives to the honest but unfortunate debtor…a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.” The federal government recognizes that unforeseen circumstances can make it difficult for a person to repay their debts, and allows for a way to help someone in that situation take a breath and start over.
Although it is possible for debtors to represent themselves in a bankruptcy court, most choose to enlist the services of a lawyer. The lawyer is able to file the petition and submit other required documents, and help walk them through the process.
Filing bankruptcy is a very personal decision, and one that should not be made lightly. There are consequences to bankruptcy, such as a negative credit report and the liquidation of some assets, but many feel that the fresh start provided by filing bankruptcy far outweighs the consequences. A debt counselor or lawyer can help answer questions, but ultimately it is up to the debtor to decide what the best course of action is.