When people think of bankruptcy, they frequently envision the end of their financial affairs with little or no hope in sight. While this may be true for some, bankruptcy is a legal option for those who cannot pay their debts. There is a type of bankruptcy that protects you from creditors so that you can regain control of your financial life, regardless of the amount of money you earn each week.
There are numerous varieties of bankruptcy. There are two fundamental categories of consumers. This includes Chapter 7 and Chapter 13 bankruptcy. While I have explained in detail the distinction between Chapter 7 and Chapter 13 bankruptcy in other articles, Chapter 7 is designed for those with limited income and consumer debt. Chapter 13 is designed for those with a steady income who may benefit from its features, such as the elimination of a second mortgage. When most people consider bankruptcy, Chapter 7 bankruptcy comes to mind. The following information implies a Chapter 7 bankruptcy filing.
To file for bankruptcy, you or your attorney must submit a petition, schedules, and statements containing pertinent personal and financial information. Because an attorney will need all of this information to prepare your documents, you will likely be required to fill out a questionnaire containing questions about your income, monthly expenses, debts, assets, and other financial information. The petition, schedules, and statements require knowledge of bankruptcy law and would be challenging to complete without prior experience. In many ways, bankruptcy documents are similar to tax returns, but they are significantly lengthier and require a great deal more information. Since most people employ a tax preparer, it makes sense to hire an experienced bankruptcy attorney to complete your bankruptcy.
Following the submission of the bankruptcy papers, the court will notify all creditors listed on those papers that you have filed for bankruptcy. It is imperative that you list all of your creditors, as failure to do so may hinder your ability to discharge a particular debt. If you uncover the error during the bankruptcy, however, you can still add the creditor through an amendment. In addition, when you file for bankruptcy, the automatic stay goes into effect. The automatic stay is a legal barrier that prevents creditors from pursuing legal action against the debtor. The automatic stay prevents creditors from pursuing their claims if you have a pending judgment, active garnishment, foreclosure, or repossession, among other proceedings. This stay will not last forever, but it will give the majority of creditors sufficient time to determine how to proceed with certain debts and possibly negotiate new terms.
After filing for bankruptcy, the court will schedule a 341 meeting of creditors approximately 45 days later. The purpose of the 341 meeting is to verify your identity, answer the trustee's questions about the debtor's finances, and enable creditors to ask questions. Creditors rarely attend hearings, but they are permitted to do so in this case.
Creditors have 60 days after the initial 341 hearing to object to the dischargeability of certain debts and raise other defenses to the bankruptcy. Again, this is not a common occurrence in bankruptcy, and your attorney can explain what to anticipate in greater detail. After sixty days have elapsed, the court is free to issue the Discharge order. The discharge is a court order declaring that you are no longer legally responsible for the dischargeable debt. In the majority of cases, this will include credit card debt, medical bills, personal loans, and any other debt listed on your schedules.
After the completion of your bankruptcy and receipt of a discharge, you are free to reconstruct your financial life and restore your credit. While credit is one of the greatest concerns most clients have about bankruptcy, the majority of clients find that their credit significantly improves after filing. The bankruptcy will remain on your credit report for several years, but your credit score will make credit available to you.""
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