Bankruptcy is one of the most difficult, sometimes even traumatic, obstacle that can be faced in life. Often due to unexpected changes in employment, medical expenses or other unforeseen factors, bankruptcy is a final option for individuals who face insurmountable debt, foreclosure and other harsh financial challenges.

Bankruptcy is an unfortunate challenge that can happen to anybody - from the young entrepreneur to the most seasoned businessman. Since the economic landscape is always changing, along with the stock market, thousands of individuals can't say they live in complete security any more.

How it Works

Debtors file for specific kinds of bankruptcy for specific reasons. A debtor who files for Chapter 7 bankruptcy is generally trying to discharge all of his debts. A typical Chapter 7 case lasts about four to six months, from the petition date to the discharge date.

Chapter 7 bankruptcy is often the better option for those whose debts, such as credit card debt and medical bills, are largely unsecured. So, if you don't own many assets, your income is below the median, and the majority of your debts are unsecured, Chapter 7 bankruptcy could be your best option.

Generally, a debtor who files Chapter 13 is employed and is trying to retain his assets while entering into a payment agreement with the bankruptcy court in order to pay off his creditors. The person will make a Chapter 13 plan, where he consents to make monthly payments to the Court for a term of three to five years. This should provide the debtor enough time to pay back the agreed upon debts.

Chapter 11 bankruptcy filings are sometimes looked upon as "strategic". In other words, management may wish to reorganize for political purposes, not simply for the sake of balancing books. Chapter 11 is reorganization, as opposed to liquidation. Debtors may "emerge" from a chapter 11 bankruptcy within several months or within several years, depending on the size and complexity of the bankruptcy.

Plans

In all instances of bankruptcy, plans are layed out, creditors vote, and the court makes thousands of reviews until a decision is agreed upon. If the plan cannot be be agreed upon, the court may either liquidate the business under Chapter 7 or dismiss the case.

When your plans are accepted, creditors are assigned priority by the court. Once your assets are redistributed, you will be free from most of your obligations, even if your debts are not completely paid off. Creditors are repaid according to the portion they agree upon. The smaller the settlement, the quicker they will be paid off.

Conclusion

Bankruptcy can be a real stress relief if you are in dire need, but it is necessary to realize how you got to this point. If you declare bankruptcy and then continue without changing your spending habits, you are destined to end up in a similar situation again.

Declaring bankruptcy is not a decision to be taken lightly, but we can help you sort out your options, review potential options, and then make a decision on how to proceed.

It is a legal chance to get a fresh start.

Want more bankruptcy information? Visit our website.