November 29, 2022

Is It a Good Thing to File for Bankruptcy?

Why is the bankruptcy filing the best among other debt-relief options? After you file for bankruptcy, the people you owe are informed, so they should not take any legal action against you over any outstanding debt after the filing date. This includes lawsuits, collection proceedings, and wage garnishments.

The terms for presiding over the bankruptcy process are established by the Bankruptcy and Insolvency Act. This makes all parties equal. You are sure that when you finish the bankruptcy payments, you will have eliminated all your debt challenges.

When you file for bankruptcy, it is a debt negotiation tool that serves all unsecured debts with only a few exceptions. With a bankruptcy attorney, you can get rid of payday loans, medical expenses, lines of credit, car loans, credit card debts, unpaid bills, and other debts after the discharge. You can then do away with all your debts after the bankruptcy case.

What Is Bankruptcy Filing?

Filing bankruptcy is a proceeding that is within the law that individuals and other institutions, who cannot pay back debts to creditors, can be relieved of some or all the remaining debts. It is mostly given out by a court order. The court bankruptcy trustee and a bankruptcy judge will look into the assets of people, businesses, and partnerships, that they do not think can repay the debts. Then they decide to discharge the debts.

A bankruptcy discharge means that people who owe debts, do not need to pay the dischargeable debt legally. After the bankruptcy proceedings, the court may decide to release the case when it thinks the business or an individual has enough assets to settle the bills. Therefore, they may not have their debts discharged.

Bankruptcy laws and federal law help people to start over again after having problems with their financial affairs, making it better than debt settlement companies. Whether the financial problem was due to bad decisions or other things, many bankruptcy lawyers believe it is a crucial recession in the economy of a capitalist.

Declaring bankruptcy depends on one’s circumstances, so you should know when to file bankruptcy and whether it is a good choice for you before you make any decision. 

Types of Bankruptcy Filings

The bankruptcy procedure will be based on whether you want to file for either; Chapter 7 bankruptcy which deals with liquidation of assets, Chapter 11 which involves sole proprietors or company reorganizations, or to file under Chapter 13 which organizes debt repayments with set payment plans.

Chapter 7 Bankruptcy                                                                                       

Individuals and sometimes companies with a small number or no assets usually declare bankruptcy under Chapter 7. It gives them a chance to dispose of unsecured debts, like medical bills and credit card balances.

Chapter 7 bankruptcy involves disposing of the debtor’s assets to pay debts. Individuals with no valuable assets and only have exempt property, like clothing and household goods, may not have to pay any unsecured debt. 

Chapter 11 Bankruptcy

Businesses file for bankruptcy under chapter 11 to restructure, continue being in business, and make profits. When a company files for chapter 11 bankruptcy, it can reduce costs, develop plans for profitability and get other ways to add revenue. 

Bankruptcy filing helps businesses to continue performing their activities without disruptions while following a repayment plan for their debts.

Chapter 13 Bankruptcy

This is also called the wage earner’s plan. People and businesses with congruous income can develop achievable monthly payments plan for their business debts.

They can go through credit counseling and learn bankruptcy basics. The debt management plan is mostly in installments for 3-5 years. The bankruptcy court will allow them to have their property as they pay creditors and honor their debt obligations.

Who Should Declare Bankruptcy?

Most of the time, people declare bankruptcy when they can’t pay their debts, such as mortgages, car loans, credit card debt, student loan debt, or personal loans.

Keep in mind that filing for bankruptcy is legal aid to have a fresh start, but it will affect your credit report and how you will use your finances in the future. Bankruptcy filers can; avoid foreclosure on their home, and prevent wage garnishment and vehicle recovery. Or other actions that their creditors can use to get their money back. However, it will be hard for them to get loans with low interest.

When Is The Right Time To File For Bankruptcy?

If you’re in debt, you may be thinking of beginning the bankruptcy filing process. Every person’s situation is different but, you can consider filing for bankruptcy as a solution for your debts because of the following reasons:

  • You are finding it hard to make minimum payments for your debt relief.  
  • A large portion of your salary covers the debt payments, so you have a small income remaining at the end of the month.
  • Your financial situation makes you not get more credit, and you are looking for payday loans and cash advances which are very expensive.
  • You have had enough of creditor calls and dealing with many money demands.

Filing for Bankruptcy? Work With Our Bankruptcy Attorney in Media, PA Today!

Before filing for bankruptcy, talk to a credit counselor to help discover and decide the best debt relief option for your outstanding debts. To know about bankruptcy, personal liability, chapter 7 and chapter 13 bankruptcy, or credit scores, you should seek advice from our bankruptcy lawyer.

There are several reasons why you should declare bankruptcy- but it is a choice that needs a lot of analysis. If you believe filing for bankruptcy may be an option, contact us today. We’ll be delighted to take you through all your options and assist you in finding out if declaring bankruptcy is the best choice for you.