Like with any legal proceeding, a successful bankruptcy is never guaranteed. The process is complex, which makes the pursuit of a bankruptcy discharge without the guidance of a lawyer risky. Even seemingly minor errors can result in the dismissal of your entire bankruptcy case. To give yourself the best chances of a financial fresh start, contact Kain & Scott right away.
In the United States, the bankruptcy process is governed entirely by federal law. For that reason, every bankruptcy must be filed in federal court. The bankruptcy petition must be filed in the appropriate federal district court. You may file for bankruptcy in the district where you have lived for the majority of the past 180 days. If your debts are primarily from your business, you could instead file in the district where the business is located.
Some of the important protections provided by the bankruptcy code go into effect the moment you file your petition. These protections are possible thanks to the automatic bankruptcy stay.
The automatic stay is a legal function that bars creditors from pursuing the debts of a bankruptcy filer. The stay has multiple effects including halting legal proceedings, freezing garnishments, and preventing additional lawsuits or collection calls to be made. These protections remain in place for as long as the automatic stay is in effect. While the stay is temporary, it can last throughout the entire bankruptcy process in many cases.
While the stay is automatic, creditors are only bound by it when they are notified of the filing. While the courts provide this notice, many bankruptcy attorneys will reach out to creditors or banks as soon as the petition is filed.
Another important concept during bankruptcy is the discharge. The discharge is the ultimate goal of most bankruptcy filings. When the court issues a discharge, you are released from the obligation of your debts that qualify. Your creditors will no longer be able to pursue you based on any of these discharged debts.
It is important to note that not all debts will be discharged. You may choose to remain obligated on certain debts secured by collateral, like your home or vehicle. Likewise, debts related to taxes or child support may not be discharged. For many, these represent on a small part of the financial hardships they are facing.
There are many types of bankruptcy cases, each represented by a chapter of the bankruptcy code. Some of these chapters primarily apply to corporate entities while others are meant for individual filers. Chapter 7 and Chapter 13 of the bankruptcy code are the two options traditionally used by individual filers.
Chapter 7 bankruptcy is primarily known as liquidation bankruptcy. It earns its name from the bankruptcy trustee’s ability to liquidate many of your assets in order to pay off your creditors. Once your assets are sold and the money is distributed amongst your creditors, the courts will discharge any remaining debt.
The good news about Chapter 7 is that many assets are protected from liquidation. There are many exemptions that protect certain property including your home, clothing, or family heirlooms. One of the primary roles of a bankruptcy attorney is to ensure you make use of applicable exemptions.
Chapter 13 bankruptcy is a much more drawn-out process than Chapter 7. Where a Chapter 7 could complete in a matter of months, Chapter 13 requires three to five years. Many individuals will only have the option of pursuing bankruptcy under Chapter 13 due to the means testing required for Chapter 7. Chapter 13 bankruptcies require you to make a court-approved plan for paying back your secured debts you wish to keep. Each month you will make a “plan payment” to the trustee, who will distribute those funds to the appropriate creditors. At the end of the bankruptcy, the goal is to be caught up on your secured debts while obtaining a discharge for what’s left.
If you are facing a mountain of debt, bankruptcy might be the right option for you. To discuss your options, contact Kain & Scott today to schedule your free consultation.