Chapter 7 Bankruptcy/Debt Discharge
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Bankruptcy is a common occurrence in the United States. Each year, thousands of individuals and businesses each year find themselves in difficult financial situations. Many of them can benefit by declaring bankruptcy and thereby having the opportunity to start fresh.
In general, bankruptcy can be defined as the legal inability to pay debts or the state of having been legally declared bankrupt. There are several different types of bankruptcy, including Chapter 7, Chapter 9, Chapter 11, Chapter 12, Chapter 13, and Chapter 15.
Chapter 7 bankruptcy is the most common type of bankruptcy in America. This type of bankruptcy filing accounts for about 65% of all consumer filings. It has many different names, such as "straight" bankruptcy or "liquidation" bankruptcy, but they all refer to the same thing. Chapter 7 bankruptcy refers to a section of the United States Federal Bankruptcy Code that contains the bankruptcy law that allows individuals, couples, and businesses to cancel (discharge) their debts. However, the bankruptcy court may have to liquidate some of the debtors' property for the benefit of the creditors.
For debtors who are engaged in business, Chapter 7 would not be the ideal solution. Chapter 11 would be a more suitable option, just as individuals whom have regular income would be better suited for Chapter 13 if confronted with a dire financial situation.
Most publicly held companies prefer to file under Chapter 11 rather than Chapter 7 because they are still able to run their business and control the bankruptcy process. Chapter 11 provides a means for rehabilitating the companies failing business. Sometimes the company triumphantly works out a way to restore profitability, and other times, the resolution is to liquidate.
Chapter 13 is commonly referred to as a "wage earner's plan." This allows you to pay off debt over 36-60 months, according to a court-approved repayment plan. This allows you to catch up on your mortgage, and does not require you to sell your home to pay your creditors.
Obtaining Chapter 7 bankruptcy protection can be a grueling process, and because Chapter 7 bankruptcy laws can be complicated, you should consult a bankruptcy lawyer to help you with your case. Experienced bankruptcy lawyers will know the ins and outs of the legal system, and they will be able to discuss the Chapter 7 bankruptcy and other possible alternatives or options if necessary.
Once a bankruptcy lawyer has explained your options, they will oversee your case including filing, paperwork and administrative tasks. In general, the Chapter 7 bankruptcy process takes approximately four to six months. It may require one or more trips to the courthouse to go before a judge.
Bear in mind that if you file for Chapter 7 bankruptcy, your debts will be discharged, but your credit will be negatively affected, for up to 10 years. A Chapter 7 bankruptcy lawyer will explain the risks to you and your financial future, as well as offer other possible alternatives to bankruptcy. Keep in mind that a bankruptcy lawyer will also have extensive knowledge about debt management.
Filing for bankruptcy is a very complex procedure that can ultimately provide you with financial freedom. Before proceeding, the question you should answer is "do I need to file for bankruptcy?"
Visit the American Bar Association (ABA) website to contact a bankruptcy lawyer to explore your options for debt relief The ABA features a lawyer locator which allows the user to search bankruptcy lawyer profiles in your local area. Access to the site and profiles is free.
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