Bankruptcy is a legal process that allows businesses and individuals to either eliminate most of their debts or repay the debts while being protected under the bankruptcy laws and the bankruptcy court. Many times, the courts divide bankruptcy into either reorganization or liquidation. There are many reasons why a person or a business may decide to file for bankruptcy.
Courts Forgive Legal Obligation to Pay Most Debts
The courts eliminate debts are through a process of debt discharging. The primary objective of this discharge is to allow individuals to start with a new financial slate. The courts clear debts through either elimination or reorganization in both Chapter 7 and Chapter 13 bankruptcy cases.
Prevent Repossession of Property
Individuals sometimes decide to file for bankruptcy to prevent the creditors from repossessing their vehicles or other property. Even if the creditors have already repossessed a property, the courts sometimes require creditors are to return the property if the owner files bankruptcy quickly enough. If the owner files Chapter 13, any missed payments will be consolidated into the reorganization plan. Once the repayment plan is in place, the owner will no longer make payments to the creditor. The owner will make future payments to the trustee assigned to the bankruptcy case.
File for Bankruptcy to Stop Foreclosure
If you are facing foreclosure, filing for bankruptcy can stop the foreclosure process before the sale occurs. However, bankruptcy does not remove mortgages if you do not make payments. Instead, bankruptcy allows the courts to reorganize past payments into a payment plan.
Lost employment is one of the top reasons why a person may decide to file bankruptcy. When a household becomes comfortable with a certain amount of income entering into the home, family members may take on extra debt while still being able to pay regular household bills. When a family suddenly loses income, the family has a mountain of unpaid debt to climb. The family can receive financial relief through bankruptcy.
These are just some of the many reasons why individuals decide to file for bankruptcy. If you are considering bankruptcy, speak with an experienced bankruptcy attorney. You can discuss all of your options and decide your next course of action.
For clear answers and information about what happens when you file for bankruptcy, schedule a free consultation with Douglas Jacobson Law Firm.