The ABC'S of Bankruptcy
For many, the prospect of bankruptcy is a very difficult reality to face. It may represent financial failings, irresponsible spending habits or even unfortunate circumstances. Regardless of your condition, bankruptcy can be the start of a new beginning. This article highlights the basics of bankruptcy and addresses some myths that may concern you as you contemplate your financial future.
Bankruptcy is a system of laws designed to protect businesses and individuals who cannot pay their debts. Those seeking bankruptcy seek a discharge of their debts; a court-ordered release of the obligation to pay certain debts. By petitioning the court to discharge burdensome debts, bankruptcy allows debtors to make a fresh financial start.
Most individuals choose one of two types of bankruptcy. Under Chapter 7 bankruptcy, known as liquidation or “straight” bankruptcy, debtors can eliminate most unsecured debts (such as credit card debt, medical bills and service debts). The bankruptcy Trustee will gather and sell the debtor’s non-exempt property to satisfy the debtor’s bills. Chapter 7 bankruptcies usually involve little if any non-exempt property, so most debtors will retain their personal property after their debts are discharged.
Chapter 13 bankruptcy involves the creation of a repayment plan based on the debtor’s level of disposable income. Through the plan, debts are combined and restructured into one affordable monthly payment made to the Trustee, who uses this money to repay the debts. This enables the debtor to retain certain property (such as a car or home) while catching up on past due debts. Payment plans last for a period of 36 to 60 months, after which certain debts will be discharged completely.
A number of myths fuel the social stigma of bankruptcy.
Deadbeat debtors – Many believe that by filing bankruptcy, they will be known as
deadbeats. This only depends on the company you keep.
Poor financial status – People are also concerned about others learning about their financial condition. Bankruptcy filings are public information, but unless you are famous (like Donald Trump, Mike Tyson or Larry King), chances are that your peers will not know if you have filed bankruptcy.
I will lose everything – Most debtors are afraid of losing everything they hold dear, including family heirlooms, jewelry and their home. The bankruptcy code includes exemptions that allow debtors to keep most of their personal property. In fact, bankruptcy can even help you keep a home currently facing foreclosure.
I will never get another loan – The obvious concern is obtaining credit or loans in the future. Most people emerging from bankruptcy obtain favorable loans and credit cards within two years after discharge.
If you are experiencing financial difficulties, learn more about your rights and options. Contact an experienced Las Vegas bankruptcy attorney for an assessment of your situation.