About Bankruptcy, Las Vegas Bankruptcy Information
What is bankruptcy?
In conversation, we often use the word "bankruptcy" simply to mean a situation where someone has run out of money. But in the legal world, "bankruptcy" is a process that allows a person who is in a difficult financial situation to work out a solution and get a fresh start. Here are some additional ways of looking at bankruptcy:
Bankruptcy is:
- An opportunity for an individual to hit a reset button when money problems get too burdensome.
- A process that gives creditors a fair and orderly way to get re-paid.
- A way for both debtors and creditors to get together and resolve a problem when it feels like there's no other solution.
- A social safety net that is an important and necessary part of any modern society. An established bankruptcy system helps everyone out in the big picture by encouraging its citizens to take the kinds of everyday risks that lead to innovation and economic growth for the country as a whole.
- A more humane (and more productive) alternative to debtors' prison.
Chapter 7? 11? 13? What's the Difference?
Chapter 7 - Liquidation. This is what most people think of when they think about filing for bankruptcy. It essentially involves taking all of your assets (with exceptions for life necessities), adding up the total value and then dividing it equally among all of your creditors. Creditors each get a percentage of what they're owed and you get to hit the reset button. In other words, creditors can no longer request payment for past money owed.
- Benefit: Within 4 to 6 months, typically everything is resolved and you continue on with your life.
- Considerations: You may lose important assets, including your home. May impact your credit score in the short run (though you can rebuild it quickly). Prohibited from filing receiving a chapter 7 discharge in bankruptcy again for 8 years. You may not be eligible to file for Chapter 7 if your monthly income is above a certain level.
- Typical use: If you have few assets and either no job or a low income.
Chapter 11 - Reorganization (rather than liquidation). Generally used by businesses rather than individuals. A more complicated and expensive process than either Chapter 7 or Chapter 13.
Chapter 13 - Repayment plan for individuals (kind of like a Chapter 11 reorganization, but for people instead of companies). You figure out your assets and monthly income. Then you work with all of your creditors to come up with a fair and workable plan to pay them at least what they would receive in a chapter 7 liquidation over a 3 to 5 year period.
- Benefit: Enables you to come up with a way to pay your creditors, often without surrendering all of your assets (e.g., your home). Allows you to deal with debts that you can't restructure in chapter 7. May allow you to eliminate mortgages and change loan terms for cars.
- Considerations: Requires a degree of discipline over a period of 3 to 5 years. Chapter 13 may be your only option if your income is above a certain level (the "Means Test").
- Typical use: By individuals who have a monthly income and/or own a home they would like to keep.
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