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The Ups and Downs of Bankruptcy
Debt is a problem with a large number of people. Consumers have overwhelming credit card debt, student loan debt, vehicle loan debts and the like. The epidemic hits people for varied reasons such as job loss, disability, household change and irresponsible spending. Once a person gets into the hole with debt, it becomes like a pool of quicksand. The situation gets so far out of hand that only a drastic solution will help. Some of the most common solutions to overwhelming debt are solutions such as debt consolidations,debt settlements and debt management programs. Bankruptcy is a solution for millions of people, but even bankruptcy has its ups and downs.
Bankruptcy is a legal status of indebtedness beyond the ability to fulfill paying it back. A bankrupt person or business goes to a US bankruptcy court so that a judge can rule them unable to pay their debt. Chapter 11 is a status for businesses, and Chapter 7 is a chapter for individuals. Corporate entities use Chapter 11 the most, but it is available to other types of businesses, as well. Chapter 11 requires the business to come up with a plan to reorganize. Chapter 7 does not require the individual to come up with a repayment plan. Those who do not qualify for Chapter 7 usually file under Chapter 13, and they have to develop a repayment plan. They will be required to pay part of their bills every month. Such businesses can ask for debt adjustments and time extensions, as well. Chapter 7 bankruptcy generally frees the individual from all debt obligations. This is called a discharge.
The Benefits of Bankruptcy
The bankruptcy process starts with paperwork filing and ends with a discharge. Many benefits come from obtaining a positive decision in US bankruptcy court. One benefit is that individuals and businesses have the opportunity to start over and release their burdens. Another benefit of bankruptcy is that creditors can no longer harass debtors once the process starts. They must stand down and wait until the meeting when all the creditors get together and either approve or fight the bankruptcy request.
The Negatives of Bankruptcy
Bankruptcy has some negative attributes that not everyone wants to experience. One of the most common negative attributes of filing for bankruptcy is that the debtor will not be able to get credit for himself or herself for a long time. The person probably will not be able to get a loan or mortgage for seven to 10 years. Another downside to bankruptcy is that it does not cover all types of debt. Even if a judge approves the bankruptcy, the debtor will still have to pay for items such as student loans and spousal or child support. Therefore, bankruptcy is not a move that can solve all problems. It can improve one’s life, but it cannot fix everything.
How to Avoid Bankruptcy
The best way to avoid having to file for bankruptcy is to save for the things that one desires instead of taking loans. Educating oneself about credit products and smart spending is another way that a person can avoid overwhelming debt. Classes can help debtors to manage their finances so they do not get stuck in the debt zone. A lawyer is the best option for those who to fall behind in debt. Lawyers can ensure that all the paperwork gets completed properly and that the creditors are receptive to repayment plan proposals. Lawyers can conduct tests to make sure that any person who is filing for bankruptcy is qualified. Anyone who is interested in filing for the bankruptcy status should contact an attorney ASAP.