Bankruptcy is a decision that should not be taken lightly, but for many people, it is the best way to escape suffocating debt and start fresh.
There are two major types of personal bankruptcy: Chapter 7 bankruptcy and Chapter 13 bankruptcy. Chapter 13 bankruptcy is a reorganization of debt: you pay a fixed monthly payment to a trustee who distributes this money to your creditors based on priority as determined by a judge. Chapter 7 bankruptcy, on the other hand, is known as total bankruptcy. You get all your debts wiped out — with a few exceptions such as federal student loans, tax liens, and other government debt — in exchange for liquidating most of your assets and using the proceeds to pay off your creditors.
Chapter 7 bankruptcy sounds like a pretty straightforward process, and for many it can provide a great sense of relief when the process is complete. However, it can also be a gut-wrenching, life-defining process — and not in a good way — if you go at it without sufficient knowledge and counsel on your side.
The most important move to make if you are considering reaching for a fresh start by declaring Chapter 7 bankruptcy is making sure you have the best attorney on your side. Here are the ways a certified attorney can help with your Chapter 7 bankruptcy.
Negotiating Asset Liquidation. In some cases, homeowners who declare Chapter 7 bankruptcy are able to keep their homes, and in other cases, they are not. The experience and skill level of your bankruptcy attorney can determine which camp you will fall into.
In fact, the bankruptcy laws dictating which of your assets must be liquidated with the proceeds going to your creditors are very ambiguous in general. In most states, any late-model cars or electronic equipment purchased recently, for example, must be liquidated, but you are allowed to keep old cars and household goods, which are older and have depreciated significantly in value. These are not cut-and-dry definitions, however, and while one bankruptcy judge may deem your 2009 Hyundai as an asset that may be kept, another may require it to be liquidated. You need a certified attorney to help tip as many of these judgment calls in your favor as possible.
Ensuring the Process is Smooth and Efficient. If you underestimate the importance of this, try to seek out a few people who have gone through Chapter 7 bankruptcy and talk to them. You will find that bankruptcy is like divorce. In some cases, it goes smoothly and quickly and relatively painlessly. In others, it can drag on for months or even years and inflict emotional damage from which it takes a long time to recover. You want an attorney who communicates with you effectively and will push to carry out your bankruptcy according to your wishes.
We spoke with The Fields Law Group, who exampled that the end goal of a Chapter 7 bankruptcy is to rebuild your financial house from scratch. They said, “the longer and more arduous the process of tinkering with the falling apart one you’re in now, the less you will have left to do things right the second time around.”
Bankruptcy is not an easy decision, and most people who are considering it are not well-versed in all its ins and outs. You wouldn’t make a decision on how to treat a major injury or illness on your own, would you? You would consult with a qualified physician for advice and guidance. Neither should you try to attempt Chapter 7 bankruptcy without the most effective counsel on your side. A certified attorney will be your best asset to starting your life over without crippling debt.
