When it comes to filing for bankruptcy it’s important to enlist the help of a lawyer as the bankruptcy process is incredibly difficult, and attempting to deal with the bureaucracy of bankruptcy is not a wise idea while under such stress. But what exactly is bankruptcy, why should an individual use a lawyer, and what is the best way to find a lawyer?
What is Bankruptcy?
Bankruptcy is when an individual or company has come to a point where they are unable to pay back any money owed to their creditors. In the USA, there are six types of bankruptcy which can occur, but only three of these are used widely, but it’s important to be aware of the six types of bankruptcy outlined in the Bankruptcy Code.
- Chapter 7, otherwise known as straight bankruptcy, is the most widely-used type of bankruptcy for individuals and businesses alike. This is the simplest and the quickest way to declare bankruptcy.
- Chapter 9 is municipal bankruptcy. Municipal bankruptcy is where a federal method is used to resolve the outstanding balances involved in municipal debts.
- Chapter 11 bankruptcy, sometimes known as corporate bankruptcy, is where an organization or an individual with large debts is put into bankruptcy. Unlike other types of bankruptcy, Chapter 11 bankruptcy favors corporate restructuring in order to allow the business to continue running while it pays back its debts.
- Chapter 12 bankruptcy is geared towards farmers and fishermen.
- Chapter 13, sometimes known as Wage Earner Bankruptcy, is the type of bankruptcy for an individual who is still on a regular income. This is designed to help the individual consolidate their debts and work out a repayment plan.
- Chapter 15 is for dealing with foreign debtors or those debtors who have already declared bankruptcy.
Chapter 7, 11, and 13 are the most commonly used forms of bankruptcy in the United States.
Why Should A Lawyer Be Used?
Yes, it’s true that lawyers can be expensive when it comes to bankruptcy cases, but it’s always better to use a lawyer because:
- The bankruptcy process is incredibly complicated and the specialist knowledge of a qualified bankruptcy lawyer is priceless.>/li>
- If an individual attempts to go at it alone then they can easily get their case thrown out because even one incorrectly filed form can ruin the entire process. The courts expect the same level of competency from all individuals who are attempting to file for bankruptcy.
- State laws can influence a specific bankruptcy case, so if an individual or business has debts which span multiple states then the process can quickly become confusing.
- Attempting to deal with a bankruptcy case while under so much stress will just make an individual prone to mistakes.
How to Choose a Bankruptcy Lawyer
No matter which state an individual or business wants to file for bankruptcy in, the process in finding a lawyer is generally the same.
- Make sure the chosen lawyer resides in the same state, or if the individual or business filing for bankruptcy has been in the state for less than three months then a lawyer from their previous state is the best idea.
- Look for recommendations from friends, family, or co-workers because they will already have the experience of working with that specific lawyer.
- Choose a lawyer which offers free consultations. This is especially advantageous because then the individual will be able to gauge the competency of the lawyer and work out whether they will be able to work together or not.
- Ask for any fees and policies, but get these things in writing. If the lawyer refuses to do this then they should be avoided.
- If the lawyer is just making matters more complicated then they should be avoided because a lawyer is there to make things clearer for the individual filing for bankruptcy.
How Long Does The Bankruptcy Process Take?
The amount of time it takes to file and discharge a bankruptcy case varies depending on the type of bankruptcy which the individual or business has filed for and their own personal circumstances. However, some rough guidelines to the most common types of bankruptcy are outlined here.
When filing for Chapter 7 bankruptcy it’s safe to say that this is the quickest type of bankruptcy bar none. Chapter 7 bankruptcy will usually last about three months minimum, but the important thing to remember is that as soon as a bankruptcy case is filed then the individual or business is protected from its creditors and any demands for repossession of property or belongings.
Chapter 11 bankruptcy is different because this can vary wildly as it depends entirely on the amount of debts and the amount owed by the business. Usually this can take a few years because Chapter 11 bankruptcy favors paying back the debt by working out a repayment plan.
The time taken to complete Chapter 13 bankruptcy can take anything from three to five years as, like Chapter 11 bankruptcy, this type of bankruptcy favors a restructuring of the business or individual’s finances in order to work out a debt repayment plan.