Is Bankruptcy Right for You?
If you’re having a tough time financially, you owe it to yourself to explore all your options. If you are dealing with garnishments, foreclosure, repossessions, or lawsuits, bankruptcy could be a solution to your financial problems. However, what is bankruptcy, and is it right for you?
Bankruptcy is a process where people and businesses can eliminate or make a plan to repay debts under the supervision and protection of the United States Bankruptcy Court. The United States Bankruptcy Court for the District of Kansas sits in Wichita, Topeka, and Kansas City. Bankruptcy attorneys at Klenda Austerman LLC regularly practice in all three locations.
What differentiates bankruptcy from debt settlement or debt consolidation programs is that, generally speaking, bankruptcy offers more immediate relief that is enforceable by federal law. Creditors must abide by strict rules that prohibit collection actions after a bankruptcy has been filed.
Creditors do not always agree to participate in debt settlement plans. These creditors may continue collection attempts, even if you are making payments toward a debt settlement plan. Fees involved in debt settlement plans could be excessive, too. As a result, bankruptcy may be a more effective way to deal with your debts.
There are many types of bankruptcy. The different types of bankruptcy are typically referred to as “chapters”, based on the various chapters of the bankruptcy code. Bankruptcy attorneys at Klenda Austerman LLC represent clients filing bankruptcy under Chapter 7, Chapter 13, Chapter 11 and Chapter 12. Based on your situation, one chapter may be better suited to your needs than the others. This determination can be made only after consultation with a bankruptcy attorney.
Chapter 7: Liquidation
Chapter 7 is the most common type of bankruptcy. Chapter 7 bankruptcy is often useful for people who have difficulty dealing with unsecured debts such as credit card debts, medical bills, payday loans, deficiencies from repossessions or civil judgments. Businesses that are ceasing operations can file Chapter 7, too.
When you file Chapter 7, a person called a trustee reviews your assets and can liquidate, or sell, certain assets that are non-exempt. The trustee then divides the proceeds among your creditors. While it might sound frightening to think of someone selling your property, many people retain much, if not all, of their property during Chapter 7 bankruptcy. The law allows you to retain many types of essential property, known as exempt property. Exemption laws are technical, so please review your unique situation with a bankruptcy attorney.
Chapter 13: A Personal Repayment Plan
Chapter 13 bankruptcy is a very flexible option for many people. Chapter 13 involves the formation of a repayment plan, where you will pay your creditors an amount you can afford and are able to pay. Debtors under Chapter 13 may retain some or all of their property during their case, so long as they abide by the terms of their repayment plan.
If you are facing the threat of foreclosure or vehicle repossession, Chapter 13 could allow you to retain your property and catch up your missed payments over time. Further, Chapter 13 may be useful to pay tax debts or modify the terms of certain unfavorable vehicle loans.
Payments for debts in Chapter 13 are often spread over the course of the case, which helps make the plan payments more affordable. Plus, you are protected from your creditors while you complete your repayment plan in Chapter 13.
Chapter 11: Reorganization for People or Businesses
Chapter 11 bankruptcy allows both businesses and individuals to restructure their debts. If a business needs bankruptcy relief and plans to continue operating, it will file under Chapter 11. Individuals may also seek relief under Chapter 11 for a number of reasons, one being the limitations on the amount of secured and unsecured debts in Chapter 13. Similar to Chapter 13, Chapter 11 involves the filing of a plan of reorganization. However, in Chapter 11, this plan must be voted on and approved by creditors.
Chapter 12: Reorganization for Farmers and Fishermen
Farmers in Kansas who need bankruptcy relief will often file Chapter 12. Only farmers and fishermen may file Chapter 12 bankruptcy. Chapter 12 shares many similarities to Chapter 13, however, it is specifically tailored to the needs of farmers and fishermen.
What about Medical Bankruptcy?
While there is not a specific type of bankruptcy called “medical bankruptcy”, it is true that many bankruptcy filings are the result of significant medical bills. Medical debts can be effectively dealt with in any chapter of bankruptcy. After an initial consultation, a bankruptcy attorney can advise regarding which type of bankruptcy may be best for you.
Isn’t it Hard to Qualify for Bankruptcy? Am I Eligible?
It is true that Congress made significant changes to the bankruptcy laws in 2005. As a result, filing for bankruptcy became more complex. While there are more steps involved for determining your eligibility, people will generally qualify for the type of bankruptcy that best suits their needs. Again, it is important to schedule an initial consultation with a bankruptcy attorney to learn if bankruptcy is right for your situation.
Ready to Take the Next Step?
If you would like to figure out if bankruptcy is right for you, call Wichita bankruptcy lawyer Eric W. Lomas at (316) 267-0331 to schedule an initial consultation.