Bankruptcy laws evolve and change over time depending upon a wide range of factors. This one of many reasons why, if a person decides that they need to apply this process to their life, it is important to have a bankruptcy attorney. And not just any attorney, but one who is knowledgeable about state and local regulations and has a good reputation.
The first part of a successful filing is knowing which of the three primary types of bankruptcy is most efficacious. This will differ from person to person and state to state. While there are other forms that exist for corporate filings and the like, the three forms that exist for individuals are Chapter 7 – liquidation, where assets are sold to mitigate levels of debt – Chapter 11 and Chapter 13.
Chapter 13 is the other form most commonly used by individuals. This one, instead of liquidating assets, will more commonly set up a 3-5 year payment plan where some portion of the owed debt is repaid. This usually leads in a reduced amount going to creditors, but clearing away the majority of debts at the end of the trustee period.
Chapter 11 is essentially a corporate filing tool and only rarely pertains to individuals. There are circumstances, such as income or asset level that may force an individual into this process rather than Chapters 7 or 13, which again illustrates the need for a knowledgeable and reputable attorney who will help their client avoid costly filings in the wrong area.
From state to state the laws vary around what can be held back from seizure or liquidation and which debts can be eliminated. Some debts such as student loans and divorce settlements are almost always exempt from the process, meaning that they stick with the filer regardless. Knowing this going into the process can be crucial in how the outcome favors a given filer. Because these rules are not the same across the country it is important to have someone who can interpret them. Another thing anyone contemplating bankruptcy must remember is that such a filing will negatively impact their credit for 7 to 10 years and that must be weighed against the current debt level.
A qualified and reputable bankruptcy attorney with strong local knowledge is essential to coming out of this process as intact as possible. Laws are complex and changeable and professional with a good name for serving local clients is the best way to get through the process.
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