Bankruptcy is something that a lot of people do not understand. It is often perceived as something that big shots such as movie stars, businessmen and athletes file when they mess their lives up. Though this is true, bankruptcy chooses no one. So in order to safeguard yourself from it, you should be extra careful with the way you handle your finances. However, if ever you are already on the verge of filing a bankruptcy, before hiring a bankruptcy lawyer, here are some things that you should know about it.
What is it?
In America and most European countries, bankruptcy is the general term for a court procedure that enables businesses and personalities to repay their debts. In general it relieves the companies and the personalities involved of their debts by following a procedure. In the United States specifically, there are three common bankruptcy codes namely: chapter 7, chapter 11 and chapter 13. These are different kinds of bankruptcies which will be expounded in this article.
Chapter 7 Bankruptcy
Individuals and corporations alike are allowed to file this kind of bankruptcy. The bankruptcy lawyer of your choice should tell you the estimated duration of the whole process so that you can estimate the amount of money that you need to pay him.
The chapter 7 bankruptcy lawyer of your choice has the option of liquidizing your property so that you can provide a lump sum to pay your debt. This means that they can sell some of your properties and the amount of money that you have garnered through that will be used to pay off your bills. For example, you have a mansion worth 15 million dollars and you got it sold. The 15 million dollars that you amassed will be used to pay off a portion of your debt. However, remember that unsecured debts (debts that are not guaranteed by collaterals) will be nullified. There are also a few kinds of properties that cannot be liquidated.
Chapter 11 Bankruptcy
This kind of bankruptcy usually involves corporations and partnerships. A chapter 11 bankruptcy lawyer usually offers a plan which usually involves reorganization and overhaul of the whole company. This keeps the business alive and will buy time for it in order to pay its creditors on a specific time frame (usually given by the court).
Chapter 13 Bankruptcy
This kind of bankruptcy is only allowed to people with a reliable source of income. A chapter 13 bankruptcy lawyer usually makes an agreement between you and the court to come up with a repayment plan. You are also expected to abide to the plan no matter what happens. This plan usually lasts for 3 to 5 years depending on the amount of money that you need to pay back.
Remember that you are already on a difficult situation. So, it is important the bankruptcy lawyer of your choice has genuine concern, expertise and the right work ethic. You should always keep in mind that this is an opportunity where you can redeem yourself. So, don’t waste it.