Filing for bankruptcy can be a traumatic, emotionally taxing, and complicated ordeal; the ramifications of which can be severe. Therefore, it's important to understand the process inside and out. That's where we come in. The Tracy Jong Law Firm is here to provide guidance and support through all steps of bankruptcy, from start to finish. Before you officially start the bankruptcy process, speak to us. We will make sure you are completely knowledgeable and comfortable with your decision. Schedule an appointment today!
What is Bankruptcy?
Bankruptcy is a legal process designed to provide debt relief to individuals in severe financial distress. Depending on the type of bankruptcy, it can help eliminate all or some debts owed to give debtors a fresh financial start. There are three common types of bankruptcy: Chapter 7, Chapter 13, and Chapter 11.
When should you consider Filing for Bankruptcy?
Are you drowning in debt? Are creditors harassing you with phone calls or letters? Are your wages being garnished? Are you behind on your mortgage payments? Do you need to stop a foreclosure? Would you like to get back on your feet financially? Would you like a fresh start? If you answered yes to any one or more of these questions, it may be time to consider filing for bankruptcy.
What is Chapter 7?
Chapter 7 is the most common form of bankruptcy. Considered a liquidation, or “straight” bankruptcy proceeding, a Chapter 7 bankruptcy involves a trustee seizing the debtor’s nonexempt assets and liquidating them, using the proceeds to pay back the creditors. Depending on equity, those who file for Chapter 7 bankruptcy are sometimes able to keep their home, vehicle, and some of their personal property.
What is Chapter 13?
Chapter 13 is another common form of bankruptcy often referred to as the “wage earner plan.” It is more common for debtors with significant assets they wish to retain, like home equity. Those with a steady income are given an opportunity to reorganize and consolidate their debt through a Chapter 13 plan, which is usually three to five years in length. A Chapter 13 repayment plan may allow you to reduce the total amount owed, which means you could pay your creditors back at a more manageable pace.
What is Chapter 11?
Chapter 11 provides for reorganization of a company’s business affairs, debts and assets, and typically involves a corporation, limited liability company (LLC) or a partnership. Chapter 11 petitions are usually filed when a corporation wants to continue operation of the business but requires time to restructure their debts. Those who file Chapter 11 must also file a Chapter 11 Plan of Reorganization. Under a confirmed plan, the debtor can then reduce its debts. Burdensome contracts and leases may be discharged, assets recovered, and operations rescaled and restructured to regain profitability.
Debt that cannot be eliminated in a bankruptcy
Not every type of debt is absolved through bankruptcy. Types of debt that bankruptcy cannot eliminate include student loans, certain taxes, child support, alimony, and debts incurred by fraud.
How will bankruptcy affect my credit?
Bankruptcy may have a negative effect on your credit report and can affect your ability to secure a loan. Typically, right after filing for bankruptcy, your credit score will start to improve. As long as you have sufficient income, you should have no trouble obtaining a car loan or mortgage within 2-3 years of filing bankruptcy. In some cases, it can even be as early as a year after the discharge of debt.
Are there alternatives to filing for bankruptcy?
Yes. Filing for bankruptcy should never be your instinct or first option. Debt settlements, debt consolidation, credit counseling, and selling of assets are all feasible options in lieu of bankruptcy. It’s important to sit down with a professional to determine the best course of action for your individual circumstances. Once we have evaluated your situation, we can make recommendations for your best option.