Bankruptcy – What You Need to Know

by | Dec 17, 2020 | Bankruptcy

Everything You Need to Know about Bankruptcy

         What is bankruptcy? Is bankruptcy in Idaho different than other states? Will bankruptcy affect my credit?  Should I hire a lawyer to file for bankruptcy? What are the advantages of filing for bankruptcy? These may be a few of the questions you are asking yourself when considering bankruptcy. This guide will provide you with everything you need to know about filing for bankruptcy and help you determine if filing bankruptcy is the best decision for you or your business.

 

So, what is bankruptcy?

Bankruptcy is a legal proceeding in which a person or business unable to pay their bills can get a fresh financial start. The right to file for bankruptcy is provided by Federal law and all bankruptcy filings are handled in federal court. While going to federal court may sound scary, hiring a professional bankruptcy attorney can make the process simple and fast.

Bankruptcy can help to stop foreclosures on your home, repossession of property or wage garnishment and cancels many of your debts. Since bankruptcy wipes out your old debts, you are likely to be in a better position to pay your current bills, allowing you to rebuild your credit and get a brand new start.

Boise Bankruptcy – Filing for Bankruptcy in Boise, The Treasure Valley and Beyond

Whether you are an individual or business owner, mounting bills and/or a dwindling stream of income may have you considering bankruptcy to remedy your current financial distress.  If you are considering bankruptcy in any capacity, it is in your best interest to recognize how your financial state of affairs will determine the course of your bankruptcy process.  Understanding Idaho Bankruptcy Law, how your finances fit into it, and the resources available to you in the state of Idaho, will ultimately set you up for a successful fresh start with your finances.

                       

Types of Bankruptcy

         Opting to pursue bankruptcy can bring a fresh start to your finances. Understanding the different types of bankruptcy is one of the first steps to getting your life or business back. There are three types of bankruptcy cases provided under the law suitable for most individuals and businesses. Chapter 7, Chapter 11, and Chapter 13.   Although most people or businesses filing bankruptcy will want to file under Chapter 7, federal legislation passed in 2005, called the Bankruptcy Abuse Prevention and Consumer Protection Act or BAPCPA 2005, made it more difficult for individuals with mostly consumer (think credit card) debt and a consistent income stream to get a liquidation. Instead, the BAPCPA 2005 made it easier for individuals to be forced into a Chapter 13 repayment plan. Businesses also may be forced into a Chapter 11 if the company can be saved and continue as an “ongoing concern.” Either way, it is beneficial to outline the financial goals you want to accomplish, research the different types of bankruptcy you may qualify for, and consult with Boise’s local expert in all bankruptcy matter, Williams Law Group.

 

Chapter 7 bankruptcy

         Chapter 7 bankruptcy is also known as “Straight Bankruptcy” or “Liquidation”.  The basic idea of a Chapter 7 bankruptcy is to clear out (or discharge) your debts in exchange for giving up your property. However, there are circumstances that allow for certain property to be “exempt” from your bankruptcy proceeding.  Generally, those who file Chapter 7 keep all of their property except property which is very valuable, or which is subject to a lien which they cannot discharge or afford to pay.

 

Chapter 13 bankruptcy

         For those who are facing a foreclosure, repossession, or income tax problems, Chapter 13 bankruptcy may bring the most relief and be the best option for you or your business.  With Chapter 13 bankruptcy filings, you file a “plan” showing how you will pay off some of your past-due and current debts over three to five years. This is why Chapter 13 bankruptcies are known as a “reorganization”.  This chapter of bankruptcy allows you to keep property and pay debts over time, usually three to five years. Overall, individuals are offered a number of advantages over liquidation under Chapter 7.

 

Chapter 11

Did you know that you can file for bankruptcy and continue to operate business? Chapter 11 bankruptcy is bankruptcy for businesses, giving them a plan to get out of debt while staying in business. A Chapter 11 bankruptcy, often referred to as a “business reorganization,” is commenced by the filing of a voluntary petition by the debtor, OR the filing of an involuntary petition by creditors. As with the other types of bankruptcy, an automatic stay is enacted to allow the debtor time to formulate a plan to pay back creditors.   Whether the petition was voluntary or involuntary, there are certain requirements that must be met. 

 

Consequences of Filing for Bankruptcy

         Bankruptcy is a scary word for most people.  When considering the consequences of bankruptcy, you should weigh the pros and cons of continuing your current financial route and what consequences your current actions will have down the road.  By filing for bankruptcy, you are essentially taking control back of your finances with a fresh start.  Although bankruptcies can stay on your credit for anywhere from seven to ten years, there are more options available to rebuild your credit once bankruptcy has been completed.

           

How to Avoid Bankruptcy

         If your finances are manageable and you simply want to avoid bankruptcy, there are many ways to do so.   Before filing for bankruptcy, every individual is required to attend credit counseling. However, you should not wait until you file bankruptcy to seek out counseling because there may be avenues to explore properly manage your finances. Credit counselors can work with you and your creditors to draft a debt management plan to repay your debts anywhere from three to five years, without the need for bankruptcy.

         Other options to avoid bankruptcy include; reducing non-essential expenses, decreasing transportation costs, spending less on entertainment, lowering housing costs, making and budget and sticking to it!  You should consider ways to increase your income, such as; finding a roommate, asking for raise, working overtime, picking up a second job, etc.  Lastly, you may consider selling unused and/or unnecessary assets such as; electronics, furniture, clothing, etc.

         When you’ve assessed your income and decreased expenses, you can begin to negotiate with creditors and prioritize your debts.  Be very cautious of debt consolidation loans and try to avoid debt settlement services that are for-profit companies.  If you must use a debt management service, find one that is a non-profit organization.

 

When to File for Bankruptcy

         If you have been attempting to get out of debt without any results, you may be hesitant to file for bankruptcy. However, bankruptcy may be the best option if you’re looking to get out of debt fast and systematically.  Nearly everyone who files for bankruptcy gets a second chance.  Before you consider taking out loans, borrowing money, using retirement benefits, cashing in your IRA, and making desperate attempts of resolving your financial situation, then you may want to consider if bankruptcy is the best option for you and your finances.  Whether your circumstance is a product of bad decisions or just bad luck, the legal system recognizes that a second chance is vital fallback in a capitalist economy.  Plain and simple, bankruptcy laws were written to give people whose finances are burdening them, a chance to start over.  

           

How to File for Bankruptcy

         When you’ve made the decision to pursue bankruptcy, your first step is to choose which kind of bankruptcy you will be filing for.  Corporations and partnerships must have an attorney to file a bankruptcy case. Individuals, however, may represent themselves in bankruptcy court.

 Although you have the option to file your own bankruptcy case, it can be very difficult to do it successfully.  Misunderstandings of the law or making mistakes in the process can affect your rights.  It is also important to understand that court employees and bankruptcy judges are prohibited by law from offering legal advice or even answer questions regarding the process.  Even though you may choose to represent yourself, you are still expected to follow the rules and procedures in federal courts and should be familiar with the United States Bankruptcy Code.  

By hiring an attorney to help with your bankruptcy case, your rights can be protected from the very start. Your attorney will advise you on which debts can be discharged, whether or not you can keep certain property, advise you of the tax consequences of filing, and help complete and file all forms properly.

 

If you are facing home foreclosure, loss of business or income, creditor harassment and threats of lawsuits, difficulty paying your monthly bills and/or vehicle repossession, Williams Law Group will walk through the bankruptcy laws with you and map out the best road to debt relief and financial recovery.

 

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