Personal bankruptcy, or consumer bankruptcy, is when an individual files to get relief from their current debt situation. Personal bankruptcy is different from business bankruptcy in that the person’s own assets may be affected by the proceeding. In a business bankruptcy filing, it’s usually the property of the business that’s at stake, not the property of the business owners.
Personal bankruptcy generally involves one of two types of consumer bankruptcy: Chapter 7 liquidation bankruptcy or Chapter 13 reorganization bankruptcy. Under Chapter 7, the person may be eligible to have certain debts discharged. However, some of their property may also be accessed by the creditors in order to make up for payments. Under Chapter 13, the person is given some time and different options to begin repaying their creditors.
When Should I File for Personal Bankruptcy?
Many people are hesitant to file for bankruptcy, even if they are in serious debt. Some use it only as a last-resort type of option, since “being bankrupt” can often be perceived in a negative light. However, filing for bankruptcy can often have some advantages for the debtor.
First of all, as mentioned, filing for certain types of bankruptcy can result in a discharge of most of the person’s debt. Also, some types of bankruptcy proceedings, such as Chapter 13, may allow the person to retain most or all of their property.
Second of all, bankruptcy can prevent a lender from seizing a person’s property or attempting to collect debt payments while the bankruptcy proceedings are ongoing. Thus, some people may file for bankruptcy in order to gain more time to organize their finances into a more workable arrangement. Thus, a person should file for bankruptcy only if they understand at least the basic effects of what each type of filing involves.
How Do I Know If I Am Eligible for Bankruptcy?
This depends on the Chapter of bankruptcy you are filing under. Some of the chapters, such as Chapter 7, require the person to complete a complex analysis known as the bankruptcy means test. This is a complex assessment of the person’s financial background which may require the assistance of a lawyer, accountant, or other type of professional.
In addition, persons who have already filed for bankruptcy in the past may be temporarily barred from filing again, especially if they have filed recently with the past few years. There are waiting periods associated for when you can file bankruptcy again. Thus, persons who are filing for bankruptcy multiple times may need to consult with a professional in order to determine their eligibility for filing.
Do I Need a Lawyer for Help with Personal Bankruptcy?
One challenge for individuals who are filing for personal bankruptcy is that they may not have regular access to professional assistance or advice on such matters. This is different from businesses who are filing for bankruptcy, as they often have access to counselors or financial advisers to assist with the bankruptcy process. You may need to hire a bankcruptcy lawyer if you need advice, legal guidance, or representation during the bankruptcy process. Your attorney can assist you so that your interests and rights are properly protected.