Filing for bankruptcy can be a confusing and daunting process, and it’s important to know the different ways you can do it. Once you have decided that filing for bankruptcy can help your financial situation, it is best to seek a consultation with a bankruptcy attorney, and they can help you decide which chapter of bankruptcy to file under.
Sometimes called “liquidation” bankruptcy, this method is for those who are unable to meet reorganization obligations and, in turn, must sell non-exempt assets to pay creditors. Under “absolute priority”, creditors collect the debt owed depending on how the money was lent. Secured debts are paid first. After the secured debts are satisfied, the remaining assets and cash are distributed to the unsecured creditors. A trustee is appointed to make sure the assets are sold and divided among the creditors.
Chapter 11 is designed to allow the taxpayer to reorganize their financial situation. Filing under this chapter does not absolve the debt; It allows arranging payments with creditors, which if payment plans are followed, will eventually settle the debt. For example, if you got divorced and kept assets you can’t pay because you now rely on one income instead of two during a bankruptcy reorganization, your creditor may agree to lower payments over a longer period of time. When filing a Chapter 11 bankruptcy, a trustee is also appointed to oversee the process.
Filing for bankruptcy may allow you to regain control of your financial obligations. If necessary, both chapters can help alleviate a serious situation by allowing you to sell assets to satisfy creditors. While it is possible to handle your bankruptcy yourself, it is recommended that you hire a bankruptcy attorney. A bankruptcy attorney has the experience and knowledge necessary to navigate the bankruptcy court system, knowing exactly what paperwork and procedures must be followed to bring the case to the most satisfactory conclusion possible. When you meet with your attorney, bring as much available information about your finances as possible so that he or she can better advise you on a course of action. Don’t wait too long because it can get to the point where it’s difficult to solve your problems. Whether you file under Chapter 7 or Chapter 11, benefits can help you get control of your finances and ease the stress of dealing with debt collectors.