If one failed to pay their debts, back in the 1800’s they were imprisoned until they repaid it in full or served out their prison terms. Seeing the cruel punishment of this, Congress established the Federal Bankruptcy Code to help debtors get a fresh start.
Bankruptcy is a scary proposition for those who are trying to do this by themselves. There are forms to be filled, documents to produce, and a hearing to attend.
It’s rarely anyone’s first choice to file for bankruptcy when trying to cope with overwhelming debt. The decision to do so is a hard and difficult decision and I understand what you are going through. However tough it is, remember don’t drain your savings and 401(k) in trying to only prolong the situation. Once considered as a last resort, bankruptcy is an accepted method of resolving serious financial problems. My goal is to help you get a fresh start and a new lease on life without those sleepless nights worrying about whether you can or cannot pay the bills coming due. Once the bankruptcy has been filed with the court, there’s a period called the “automatic stay”. This will prevent creditors from taking certain action against the debtors. Creditors cannot continue to garnish the debtor’s wages, cannot try to take back the debtor’s vehicle, and cannot foreclose on the debtor’s residence.
The Bankruptcy code is divided into what’s known as liquidation or reorganization. Depending on your situation, you will either file a Chapter 7 or a Chapter 13.
Chapter 7 Liquidation
Most bankruptcies filed in the United Sates involve liquidations. In a liquidation case the Bankruptcy Trustee will collect all the debtor’s non-exempt assets and sell it to repay the creditors. If the debtor doesn’t have any non-exempt assets then the creditors will not get paid.
Chapter 13 Reorganization
Under this type of bankruptcy, debtors are allowed to keep their assets if they agree to pay off their debts according to a plan approved by the bankruptcy court.
Before you can file for bankruptcy, you will need to attend a debtor’s education class which can be completed over the internet.