What is Bankruptcy?
When a person or business is financially incapable of repaying currently outstanding debt, they may consider filing for bankruptcy. The initial step of the process of filing for bankruptcy consists of a petition. Typically a petition is filed by the debtor, although in some cases the creditor may file the petition. Following the petition filing, the assets of the debtor are evaluated to determine value. The assets may then be used as a form of repayment of currently outstanding debts.
In accordance with federal law, debtors who are unable to repay outstanding debt have the right to file for bankruptcy. When you file for bankruptcy, creditors are immediately given notice to refrain from further attempts to collect debts until a judgment is reached on your bankruptcy claim in accordance with federal bankruptcy law.
Bankruptcy is a useful financial tool that can help debtors when they are unable to repay their debts. Through the process of bankruptcy, it becomes possible to be forgiven of the legal obligation to repay some, or all outstanding debts which is referred to as “discharge of debts”. An attorney from Brandy Austin Law Firm, PLLC will be able to explain viable bankruptcy options and assist with making a plan of action.
Advantages of Bankruptcy
There are a number of ways bankruptcy can help a person avoid complete financial devastation by helping to prevent loss of personal property or assets such as:
- Stopping foreclosure on a house or real estate property.
- Prevent repossession of a car or other property, and can also require the creditor to return property after repossession.
- Halt wage garnishment, debt collection harassment, and intrusive actions to collect debt.
- Gain the ability to challenge creditor claims who may have committed fraud or are attempting to collect more than is actually owed.
Bankruptcy is not an easy way around financial problems, rather it is a tool for lessening the impact of the legal repercussions that may come with being unable to repay your debts. That being said, bankruptcy is only viable for people under certain circumstances.
Consulting a bankruptcy attorney prior to beginning the process is an essential step to understanding if bankruptcy is a viable option for relieving debt. A bankruptcy attorney from Brandy Austin Law Firm, PLLC will be able to explain if the bankruptcy path is appropriate based on the circumstances of the debtor.
Types of bankruptcy
Under federal law, there are four types of bankruptcy cases that apply to individuals.
- Chapter 7 – commonly referred to as “liquidation” or “straight” bankruptcy. Chapter 7 requires the individual to relinquish property or assets that are not “exempt”. The status of their property as “unexempt” is determined through an evaluation of all property. The unexempt property may be sold to help repay creditors. In many cases, individuals who file for bankruptcy keep all of their very valuable property.
- Chapter 11 – also referred to as “reorganization”. Chapter 11 bankruptcy is typically used by businesses or individuals whose debts are very large.
- Chapter 12 – reserved for family farmers and fishermen.
- Chapter 13 – another form of “reorganization”. Chapter 13 is used by individuals to repay all or some of their debts based on their current level of income, over the course of a set number of years as determined through bankruptcy proceedings. Chapter 7, and Chapter 13 are the most commonly filed for by individuals.
How does bankruptcy affect credit?
Generally speaking, bankruptcy can appear on your credit report for ten years from the date of filing for bankruptcy, but since bankruptcy eliminates old debts, debtors are likely in a better position to pay current bills. In some cases individuals are able to receive new credit. Generally, an individual’s credit score will improve significantly within 18 to 24 months after the bankruptcy discharge.
Contact Brandy Austin Law Firm, PLLC
Our firm is well prepared to represent clients in need of an experienced bankruptcy attorney in Texas. If you feel that you may be facing circumstances which may warrant bankruptcy, we encourage you to contact Brandy Austin Law Firm, PLLC to schedule a free initial consultation.