Most of the time, I hear very valid concerns about why a person would not file for bankruptcy. The number one concern I hear is that if they file, they will ruin their credit. Although ruining your credit is a valid concern, more than likely if you are considering filing bankruptcy, your credit is already damaged. Another valid concern is that filing for a bankruptcy means you are reneging on your bills that you have every intention of paying. So, if these concerns are valid, why would anyone file for a bankruptcy?
There are a variety of good reasons to file for bankruptcy. Due to no fault of your own, you may have gotten yourself into a situation that bill collectors are hounding you, your wages are being garnished, your utilities have been cut off, and/or you are getting foreclosure notices on your home mortgage. These are all good reasons to file for a bankruptcy. You may now ask the question, how could I get into a situation like these due to no fault of my own. You could have gotten ill and medical bills have piled up beyond your ability to pay them off, you or your spouse could have lost your job losing necessary income to maintain your lifestyle, or you could be experiencing a divorce. All of these things can happen through no fault of your own. When they do, bills and living expenses continue on. There are a variety of bankruptcies that you can file and filing for bankruptcy is not necessarily a cure all. The two most common bankruptcies filed by individuals are a chapter 7 and a chapter 13.
A Chapter 7 bankruptcy, commonly called liquidation of your assets, is normally the simplest and quickest form of bankruptcy. It is available to individuals, married couples, corporations, and partnerships. A trustee that is appointed by the court will gather and sell your non-exempt property, and he will use the proceeds from the sale in order to pay your creditors. Most chapter 7 cases are “no-asset” cases, meaning you do not have any non-exempt property for the trustee to sell.
A chapter 13 bankruptcy is the second bankruptcy available to individuals and is also called a wage earner’s plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years. If the debtor’s current monthly income is less than the applicable state median, the plan will be for three years unless the court approves a longer period “for cause.” If the debtor’s current monthly income is greater than the applicable state median, the plan generally must be for five years. In no case may a plan provide for payments over a period longer than five years. During this time the law forbids creditors from starting or continuing collection efforts.
The moment you file a bankruptcy, a judge will order all collecting actions to cease, an important feature called the automatic stay. The automatic stay, applicable to all types of bankruptcy filings, means that the mere request for bankruptcy protection automatically stops and brings to a cessation certain lawsuits, foreclosures, utility shut-offs, evictions, repossessions, garnishments, attachments, and debt collection harassment. That means all creditors will have to go through a trustee in order to get any of their claims back.
Choosing the appropriate bankruptcy to file can be a complicated and tricky process. It means you will have to deal with any concerns you have about filing a bankruptcy. You will need a bankruptcy lawyer in order to properly understand how these concerns may apply in your situation. If you determine you are in need of relief from the stress associated with debt and you live in or around Las Vegas, Nevada, contact us today and we will help you find a bankruptcy attorney in your area that will help you with any questions you may have on bankruptcy law.
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