When consulting with a potential client initially, it is important to determine the pros and cons of filing bankruptcy for a given client, as well as their estimated cost of filing bankruptcy, too. Having a decent understanding of the advantages and disadvantages of filing for bankruptcy will assist clients in making part of these decisions beforehand on their own.
Although many advantages of bankruptcy exist, numerous reasons for not filing a bankruptcy petition also exist. In some instances, financial or other issues, which may have led an individual to seek bankruptcy assistance, may be better addressed through other maneuvers, aside from filing for bankruptcy.
One very real plausible outcome in Chapter 7 bankruptcy is the loss of all unexempt property owned. When meeting with a client, a bankruptcy attorney will assess all assets of a client and ascertain whether or not this property is exempt during bankruptcy. If not exempt, the property will be sold by a court appointed Trustee. In most Chapter 7 cases, all assets are exempt, however for instances where assets are not exempt, Chapter 13 may prove a better filing option. In Chapter 13, value of unexempt assets is simply part of the formula in determining how much money must be repaid to unsecured creditors over time. In Chapter 13, unexempt property is not exposed to a possible judicial sale by a Bankruptcy Trustee.
Bankruptcy filings will remain on an individual’s credit report for a period of ten years. In bankruptcy, however, obligations to repay debts are erased through the discharge of the debts during the bankruptcy process. Therefore, the debtor is no longer legally liable for the debts, which will help a debtor’s ability to maintain a reasonable level of credit payment history over the course of the next ten years. In some instances, the discharge will allow individuals to obtain credit, however at exorbitant interest rates in many cases.
Attorney fees can cost anywhere from one thousand to two thousand dollars for a regular Chapter 7 bankruptcy. In many cases, clients seeking my assistance for debts under five thousand dollars I rarely recommend proceeding with filing anything. If anything, direct negotiations with creditors are a much more advisable action.
In Chapter 7 bankruptcy, the main goal is to obtain a discharge of all unsecured debts. To obtain the discharge, debtors must file for bankruptcy, which will also end creditor harassment and financial stress relating to the situation.
If a creditor sues a debtor and obtains a judgment, the next action is an execution on that judgment. In executing a judgment, creditors can force the sale of personal property and garnish bank accounts. When filing for bankruptcy, this will immediately cease and protect debtor’s property. Over the course of time, however, the total amount of property one can protect is dependent on the exemptions allowed under the bankruptcy code.
Once bankruptcy is filed, automatic stay forces an immediate cessation to creditor actions, including repossessions, garnishments, sheriff sales, foreclosures, utility shut-offs, lawsuits, and in many cases, evictions.
During bankruptcy, debtors now have ways to deal with secured creditors. In some instances, judgment liens against one's home can be eliminated in bankruptcy. Payment of secured debt, in Chapter 13 bankruptcy, can be reorganized and given time to be repaid without any default occurring, such as loss of home or automobile.
For more information about your situation, it is highly advised that you consult with a Bankruptcy Lawyer before making a decision to file for Bankruptcy.