FAQs About Bankruptcy
Updated: Aug 13
WHAT IS BANKRUPTCY? Bankruptcy was created by Federal Law. Bankruptcy allows a debtor to ask the Court to either liquidate or reorganize their debts. This process means that the Debtor will either ask the Court to liquidate all previous debt, or to repay the debt at a lower rate.
SHOULD I CONSIDER BANKRUPTCY? If you are facing overwhelming debts, and do not know how you will continue paying them, then Bankruptcy may be an option. Most individuals who file bankruptcy will receive a fresh start, through the discharge Order, which allows them to begin their life without debts weighing them down.But some individuals with very high credit scores may not want to consider bankruptcy, unless they no longer have the income to pay their debts.
CAN I KEEP MY HOME OR CAR IN BANKRUPTCY? Many debtors can keep some, if not all, of their property. I have personally witnessed debtors keep both a home and car in bankruptcy. This can be done by "reaffirming" an old debt, or through a Chapter 13 plan.
CAN ANYONE FILE BANKRUPTCY? Most individuals can file for bankruptcy. If someone did not file taxes, or has filed for bankruptcy within the last few years, they may have a more difficult time filing for bankruptcy. But the large majority of debtors have no problem with eligibility.
WHAT ARE THE TYPES OF BANKRUPTCY? The 2 main types of bankruptcy are either Chapter 7 or Chapter 13. A Chapter 7 is a liquidation bankruptcy. This means a debtor must claim exemptions and anything not exempt will be liquidated. It tends to be more cost-effective, but it has limited eligibility. A Chapter 13 is a reorganization bankruptcy. This means that a debtor must provide future income and reorganize debts. A Chapter 13 can adjust interest rates on loans and lower payments, sometimes very significantly.
WHAT SHOULD I EXPECT? An experienced bankruptcy professional, like Kyle D. Clark, will ask a new client for several documents that will be required by the Court. Some examples include your recent tax returns, recent paystubs, a copy of your driver's license, and other documents to show the Court that you have filed in "good faith." Once the petition gets scheduled for a 341 "Creditors" Hearing, then many Chapter 7 debtors will not face any other Court dates. A Chapter 13 debtor may be required to appear at an additional Court hearing to discuss their Chapter 13 plan, but this process tends to be informal.
If you would like to speak with an experienced debt and bankruptcy professional, call Attorney Kyle D. Clark at 256-361-9829, or click here.
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