Q.What is bankruptcy?
A.Individuals and businesses who are having problems paying their bills, or who are threatened by a creditor with a lawsuit, a garnishment or a seizure of property often consider bankruptcy as a solution to their debt problems. Bankruptcy is a federal court process designed to help consumers and businesses either eliminate their debts completely, or repay a portion of them under the protection of the bankruptcy court.
Present bankruptcy law provides essentially for three types of proceedings, the most common of which are:
- Chapter 7 Bankruptcy (also known as a “straight” or “liquidation” bankruptcy), involves a court-appointed trustee liquidating the debtor’s non-exempt property and it is generally suitable for low wage earners with substantial "Unsecured Debt" (credit cards, medical bills, etc...);
- Chapter 13 Bankruptcy (also referred to as “a reorganization plan for adjustment of debt”), allows the debtor to keep most of his or her property, but involves submitting a formal five year plan to pay off a portion of the debt in installments as the debtor continues to earn money; and
- Chapter 11 Bankruptcy (“reorganization”) is often used by corporations seeking to liquidate or reorganize.
Although there are many paralegal services and debt consulting firms offering to assist individuals in financial distress, you should consult a experienced local bankruptcy attorney if you own a home, or other significant assets. An experienced banruptcy attorney will be able to answer your specific questions and concerns and assist you in protecting your most valuable assets.