Sometimes, life doesn’t always work out in ways that we plan and despite our best efforts it is difficult to get ahead. Bankruptcy happens when an individual or business is unable to repay their debts to creditors. For many, bankruptcy is a jarring and terrifying process filled with uncertainty; here is some information aimed towards helping those who may be struggling with concerns about bankruptcy.
How Does Bankruptcy Happen?
Most people hear about businesses falling into bankruptcy on the news, but in reality about 97% of all bankruptcy filings are actually made by individuals and not businesses; there are over 1.5 million people in the United States that file for bankruptcy every year according to bankruptcy court statistics. There are dozens of reasons for why one might fall into bankruptcy: home loans, student loans, medical bills, business loans, the list goes on. A Harvard study found that medical bills are responsible for 62% of all personal bankruptcies while student loans account for at least one percent of bankruptcies in the nation. Many people believe that bankruptcy is the end, but not all bankruptcies are the same.
The Nuances of Bankruptcies
There are two primary forms of bankruptcy available to individuals: chapter 13 bankruptcy and chapter 7 bankruptcy. A chapter 7 bankruptcy eliminates all of the debt the individual owed by liquidating the individuals assets — this excludes property exemplified by the Bankruptcy Code. In order to qualify for a chapter 7 bankruptcy, an individual must pass a means test that shows that they barely have enough income to get by. If an individual is able to make enough money to repay creditors within three or five years, it may be best to apply for a chapter 13 bankruptcy. With a chapter 13 bankruptcy the individual retains ownership over their assets and the debt that they owe is readjusted to allow repayment. A chapter 13 is typically best for those who are able to cover the cost of living but unable to repay debts while a chapter 7 is best for those with few assets and barely enough income to get by.
Finding Legal Aid
Hiring a bankruptcy lawyer from a trusted local law firm could be the best way to assess one’s financial situation. A bankruptcy attorney will take creditor collection calls on their client’s behalf while composing a bankruptcy petition to be reviewed by the client. Some of the most experienced bankruptcy law firms are able to negotiate with creditors to find an agreeable debt reassessment in the case of a chapter 13 and to help those filing for a chapter 7 make a successful case to help clients pass the means test. Filing bankruptcy can be an intimidating move for many people, but no one has to do it alone thanks to qualified, professional bankruptcy law firms.