Facing any type of financial hardship in Benbrook, TX can be one of the hardest realities to grasp. Sometimes, the slow culmination of poor financial decisions amounts to an overwhelming debt to sort out. Other times, challenges in life can force someone to rack up a lot of financial commitments to solve things in the short term but leave an unrealistic burden in the long term. For some people who find themselves in these situations, bankruptcy becomes one possibility for a resolution. However, advancing a bankruptcy claim is overwhelming, and there are a ton of myths about the process that can prevent someone from achieving the relief it can offer. Working with a bankruptcy lawyer is the most recommended approach to ensuring that you have a thorough understanding of the process from start to finish.
Bankruptcy is a legally established financial relief procedure that gives individuals or organizations the option to recover from a large sum of debt that has piled up. This is typically in the form of a discharge, which is a form of debt forgiveness that comes with different consequences depending on what form of bankruptcy you file for. It could also mean some type of debt restructuring that modifies the original payment arrangement to be something more realistic for the new circumstances the debtor is in.
It would not be possible to create a bankruptcy program that could address all financial challenges in a single structure. This has led to the creation of many different bankruptcy options to choose from. These options are known as chapters. If you are stuck trying to figure out which avenue would help the most in your recovery journey, a bankruptcy attorney can help you narrow your thought process down to the right selection.
The most common choices utilized include:
- Chapter 7 Bankruptcy: You may have also heard this referred to as "liquidation bankruptcy." This is an option chosen by people who have little to no income available. This puts them in a bind of not being able to commit to any type of payment plan, no matter how motivated they might be to close out this debt. In Chapter 7, all of their debt must be covered by selling non-exempt assets. A few items they may be able to keep include their home or a retirement account. Once everything that qualifies has been sold, all outstanding debt will be canceled.
- Chapter 13 Bankruptcy: Another name commonly used for Chapter 13 is "wage earner's bankruptcy." Unlike candidates for Chapter 7, this option is designed for people who wish to repay their debt but need a different system for repayment than what they currently have. This typically gives someone a new three- to five-year repayment plan under terms and conditions that cater to their income and other financial responsibilities.
- Chapter 11 Bankruptcy: The previous two programs are designed for individuals, which is very different from how Chapter 11 operates. This option is a relief for businesses that have found themselves in a repayment jam. A huge reason why businesses find Chapter 11 attractive is because they can keep their doors open and run the business while repaying the debt on the side.
These simplified explanations can help you determine which one is closest to addressing your specific situation. However, it is advised to work with a bankruptcy lawyer who can spend time analyzing your debt and make sure you choose the most appropriate repayment program for your needs.
Bankruptcy is not something that you just fill out a quick form for and begin. Each step of the process advances under the close eye of many different professionals to make sure the new program maximizes the debtor's ability to finally repay the money owed.
The typical process follows these steps:
- Counseling: A lot of education and personal examinations take place at the beginning of any bankruptcy inquiry to ensure that any resulting consequences of the repayment program will be outweighed by the long-term value it can provide. People can expect to learn about all the different bankruptcy options compared to other traditional payment plans, such as debt consolidation.
- Filling Out the Petition: The person seeking debt relief must submit an official petition to the bankruptcy court. The petition will provide a comprehensive view of the individual's assets, liabilities, income, and all other pertinent details that would indicate if the bankruptcy chapter chosen is most appropriate.
- Automatic Stay: Once the petition is officially filed, an automatic stay will go into effect. This is to stop any collection agencies from bombarding the debtor with phone calls and emails trying to glean any form of payment. If any outstanding legal claims or active wage garnishments were coming out of the individual's paycheck, the automatic stay would also end those.
- Trustee Appointment: To make sure that the bankruptcy remains compliant the entire time, a trustee will be appointed. Their role is to sell any assets that are going to contribute to the debt total and to distribute all of the proceeds to the creditors seeking repayment.
- Debt Discharge: Once all the applicable assets have been sold, and as much debt as possible is paid off, the remaining balance due will be forgiven. This is called a debt discharge and is the day many individuals and businesses alike have longed for. Having this fresh start can be incredibly valuable for moving forward, but it does come with its own financial and credit repercussions. Be sure to chat with an attorney about these short- and long-term impacts to make sure it's still an arrangement you are comfortable with.
- Case Closed: Once the debt has been discharged, and there is no longer any money owed, the bankruptcy case will be officially closed.
If you are facing the prospect of needing financial relief, contact the attorneys at Steele Law Firm today. Our team of bankruptcy lawyers operates as transparently as possible, giving their honest opinion on what relief program would give you the most value over time. We look forward to learning more about your challenges and how we can help.