Bankruptcy is a legal proceeding in which people who are unable to pay their bills can get a fresh financial start. The right to file for bankruptcy is provided by federal law, and all bankruptcy cases are handled in federal court. Filing bankruptcy is a way to instantly stop all of your creditors from trying to collect debts from you, at least until your debts are sorted out according to the law. Which means if you are experiencing a lot of nasty phone calls, they will stop.
According to Tripp Finley, Esq. of Diamond McCarthy Law Firm, bankruptcy can make it possible for you to eradicate the legal obligation to pay most or all of your debts. This is called a discharge of debts. It is designed to give you a fresh financial start.
Bankruptcy can stop foreclosure on your house or mobile home and provide you the opportunity to catch up on missed payments. However, bankruptcy does not automatically eliminate mortgages and other liens on your property without payment.
It can prevent repossession of a car or other property, or force the creditor to return property even after it has been repossessed.
It can also stop wage garnishment, debt collection harassment, and similar creditor actions to collect a debt. Restore or prevent termination of utility service. Allow you to challenge the claims of creditors who have committed fraud or who are otherwise trying to collect more than you really owe.
But bankruptcy cannot fix every financial problem. And it may not be the right course of action for you. In bankruptcy, it is usually not possible to eliminate certain rights of "secured" creditors.
According to Tripp Finley, Esq. of Diamond McCarthy Law Firm, a "secured" creditor has taken a mortgage or other lien on property as collateral for the loan. Common examples are car loans and home mortgages. You can force secured creditors to take payment over time in the bankruptcy process and bankruptcy can eliminate your obligation to pay any additional money if your property is taken. However, you generally cannot keep the collateral unless you continue to pay the debt.
Bankruptcy also cannot discharge certain types of debts singled out by the bankruptcy law for special treatment such as child support, alimony, some student loans, court restitution orders, criminal fines, and some taxes.
Protect cosigners on your debts. When a relative or friend has cosigned a loan, and the consumer discharges the loan in bankruptcy, the cosigner may still have to repay all or part of the loan.
Different types of bankruptcy include:
Chapter 7-which is known as straight or liquidation bankruptcy. It requires a debtor to give up property, which exceeds certain limits called exemptions, so that the property can be sold to pay creditors.
Chapter 11-which is know as reorganization, is used by business and a few individual debtors whose debts are very large.
Chapter 12-is reserved for family farmers.
Chapter 13-is called debt adjustment and it requires a debtor to file a plan to pay debts or parts of debts from current income.
Most people filing bankruptcy will choose to file under either chapter 7 or chapter 13. Either type of case may be filed individually or by a married couple filing jointly.
As with any area of the law, it is important to carefully select an attorney who will respond to your personal situation. The attorney should not be too busy to meet you individually and to answer questions as necessary.
The best way to find a trustworthy bankruptcy attorney is to seek recommendations from family, friends or other members of the community, especially any attorney you know and respect. You should carefully read retainers and other documents the attorney asks you to sign. You should not hire an attorney unless he or she agrees to represent you throughout the case.
In bankruptcy, as in all areas of life, remember that the person advertising the cheapest rate is not necessarily the best. Many of the best bankruptcy lawyers do not advertise at all.
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