A troubled economy makes things more difficult for everyone. For whatever reasons, however, some people are hit harder than others. A company or industry collapsing can result in workers-even those with high-paying, stable jobs-to suddenly find themselves unemployed. Except for the very wealthy, losing a job can have catastrophic effects on a bank account.
In addition, most Americans are burdened with some form of debt: student loans, mortgage payments, car payments. The combination of debts and a sudden loss of income can quickly spiral out of control. Sometimes the best way to recover from out-of-control debt is to file for bankruptcy. Bankruptcy isn't the end of the world, and in fact helps many Americans turn their lives around. The US bankruptcy code was put in place to you get back on your feet.
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However, because the economy and financial world are constantly becoming more complex, the government has had to make the bankruptcy code more and more detailed. Consequently it can be very difficult to understand the bankruptcy code and where you fit into it.
The bankruptcy code, part of the much larger body of laws called the United State Code, is divided into a series of chapters. These may have a familiar ring: you may have heard of a company filing for Chapter 11 bankruptcy, for example. Chapter 11 is almost always used by corporations and provides mechanisms for the business to reorganize itself and its debts.
But don't worry: although it's possible for individuals to file under Chapter 13, there are other parts of the bankruptcy code that are designed to better suit most individuals. Aside from the rare instance of Chapter 11, most individuals choose to file under Chapters 7, 12, or 13. Each of these routes can be very different from the others, and which one works for you depends on your situation.
Chapter 7 is sometimes called "straight bankruptcy" and involves the liquidation of assets to pay creditors. Stated less technically: this means selling some of your possessions to make up for debts. This sounds dramatic (and certainly can be), but you can declare some property as exempt, and certain debts are relieved immediately. In many cases this can be better than other bankruptcy options.
Chapter 13 details bankruptcy reorganization for individuals. If you're permitted to file for Chapter 13 bankruptcy, a federal bankruptcy court will approve a debt rehabilitation plan. This option isn't available to everyone: there are restrictions on the amount of debt you can have going into Chapter 13.
Chapter 13 has certain advantages over Chapter 7, including protection against some foreclosures and the ability to relieve a wider range of debts. Chapter 12 is similar to Chapter 13, but only available to family farmers and fishermen. If this applies to you, it offers protections in addition to those under Chapter 13.
As you can see, federal bankruptcy law is very complex. Without the help of a skilled bankruptcy attorney, deciding what course of action is best for you can be a difficult and stressful process-if you even need to file. The sooner you seek the assistance of a bankruptcy lawyer, the sooner you can start your financial recovery. In South Florida, the Boca Raton bankruptcy law offices of Eric N. Klein & Associates, PA offer the experience and expertise you need to rebuild your financial health.
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