Due to the financial problems brought about by the current circumstances, a lot of individuals are having trouble with debt management. This is especially true nowadays since a lot of people have been negatively affected due to the pandemic. On top of being a global health crisis, a lot of people lost their jobs or businesses.
Struggling with debt is extremely stressful, which is why a lot of people are now considering bankruptcy. Filing a bankruptcy petition can help you have a fresh start in terms of your finances. There are, however, certain rights covered by both federal and state law that you must take into account.
If you have plans of declaring bankruptcy, consult with dedicated Tacoma bankruptcy attorneys. Doing so will allow you to know how to file a bankruptcy petition and know more about the different available bankruptcy options.
What this article will focus on are the following topics:
- How debtors are protected
- How creditors of secured debts are protected
- How other parties involved are protected
How Debtors are Protected
A Chapter 7 liquidation bankruptcy and a Chapter 13 reorganization bankruptcy are the two most common types of bankruptcy cases. While there are different bankruptcy forms and paperwork involved, they both protect the rights of the bankrupt filer against creditor harassment.
As part of the bankruptcy Chapter 7 process, trustees will have to liquidate all non-exempt assets. A bankruptcy trustee will manage the sales and will distribute the funds to creditors and lenders. It is not uncommon, however, that a bankruptcy case is a no-asset case.
When filing Chapter 13, on the other hand, one would need to complete a debt repayment plan. Based on the monthly income stated in the bankruptcy means test, this payment plan is meant to help the filer repay his or her obligations on time.
One of the advantages that you can look forward to when you file for bankruptcy is the automatic stay. This is a form of bankruptcy protection that can help you stop foreclosure and stop wage garnishment. After you file a petition in the bankruptcy court, the automatic stay shall take effect. Debt collectors would then be prohibited from harassing you, asking you to pay off what you owe.
How Creditors are Protected
Aside from credit counseling and a financial management course, one crucial part of a bankruptcy proceeding is the 341 Meeting of Creditors. If you file a petition in bankruptcy, you must be able to answer any questions related to your finances, income and living expenses, debts, and financial transactions. In complex situations where a creditor believes that the individual filing bankruptcy has committed fraud, objections will likely be made.
If the creditor files a lawsuit to assess the non-dischargeability of a debt or objects to the entire bankruptcy filing, the filer will not obtain the court order for the discharge. Depending on the specifics of the bankruptcy petition, litigation can take six months (or even more). This is where legal representation from dedicated Tacoma bankruptcy lawyers will be extremely useful.
Additionally, the case can take even longer if you want to discharge student loans. For you to wipe out your student loan debt, filing a lawsuit and arguing that repaying the debt would cause undue hardship would be necessary. You would need to negotiate with the lender or argue your claims at trial. This may delay the entire bankruptcy procedure for a year or more.
How Other Parties Involved are Protected
Additionally, while a bankruptcy discharge will indeed allow you to wipe out certain types of debt that you owe, certain obligations are generally non-dischargeable. The rights of those who were meant to receive child support and alimony, for instance, are upheld despite the bankruptcy declaration. Similarly, certain tax debts and fines, and penalties cannot be discharged. A competent Tacoma bankruptcy lawyer can further explain what debts fall under these categories.
Filing for bankruptcy, whether under Chapter 7 or Chapter 13, requires tons of patience and perseverance. There is a need for several supporting documents and the time involved can be longer than expected. The tedious bankruptcy process, however, is worth all the hassle. For one, if you do decide to declare bankruptcy, your legal rights and that of all involved can be protected. Additionally, if things go well, you can look forward to a much better life after bankruptcy.
If you are planning to file for bankruptcy, or if you are struggling financially and would like to explore your options, call our bankruptcy law firm. We can provide the legal services you need and help you decide on which type of bankruptcy will enable you to start with a clean slate and rebuild your financial future. Call us at Jones Legacy Law and consult with a top-tier Tacoma bankruptcy attorney.