For most consumers, life before bankruptcy is fraught with financial difficulties. It is important to remember that although bankruptcy is not the first resort, it is best not to wait too long to take action. If you are facing what seems to be insurmountable debt, contact an attorney at once in order the make the best of a bad situation.
Bankruptcy – An Overview
Bankruptcy is a legal vehicle that provides relief to individuals and businesses in serious financial trouble. Generally, the bankruptcy process assesses the debtor’s assets and liabilities and provides a structure within which the debtor is allowed to keep exempt property while attempting to satisfy as many eligible debts as possible (according to an order of priority established by law). Remaining eligible debts are discharged. Certain debts, like domestic support orders, debt obtained by fraud and most tax debt, are generally ineligible for consideration in a bankruptcy case.
The traditional stigma of bankruptcy has faded for the most part, and it has been replaced by the view that bankruptcy is a fresh start after a time of financial trouble. Many bankruptcy debtors have experienced unexpected and extreme financial shock that is out of their control, caused by sudden events such as job loss, business failure, death, divorce or illness.
In such cases, filing bankruptcy may be the right answer. If you are facing serious financial challenges, contact Key, Greer, Harrison, & Casey in Pelham, AL, to schedule a consultation with an experienced bankruptcy attorney who can help you assess your legal options.
When an individual falls desperately behind in his or her debt payments, one option may be to declare bankruptcy. Bankruptcy is a legal proceeding in a federal bankruptcy court that relieves the debtor of some (or all) of his or her debts. While bankruptcy may not be the best option for everyone, in the right situations, it can provide people with a fresh start.
Like a consumer, a business sometimes finds itself in the uncomfortable position of being unable to pay its debts. One solution is to file for bankruptcy, a legal process in federal bankruptcy court that releases the business from the obligation to pay all or some of its debts.
Credit Counseling Requirement in Bankruptcy
In 2005, Congress passed and President George W. Bush signed the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), a bankruptcy reform law. One of the requirements BAPCPA imposes on a bankruptcy debtor is to receive credit counseling from an approved credit counseling agency before the bankruptcy filing.
Surviving the Emotional Effects of Bankruptcy
No matter what circumstances ultimately led to filing bankruptcy, both the practical and the emotional impacts on the debtor will be enormous. Confronting the emotional and psychological issues surrounding bankruptcy and reaching an understanding and acceptance of the situation are essential to rebuilding and maintaining a successful financial life.
Bankruptcy Resource Links
General information regarding consumer debt and bankruptcy, provided by the American Bankruptcy Institute.
Bankruptcy: An Overview
A bankruptcy overview from Cornell University Law School, including links to state, federal and other sources.
A list of links to official websites of U.S. Bankruptcy Courts around the country.
Official Bankruptcy Forms
From the Administrative Office of the U.S. Courts, this site is a clearinghouse for forms that could be needed by individuals and businesses throughout the bankruptcy process.
Official website where consumers can obtain free credit reports from the three national credit-reporting companies.
Frequently Asked Questions
Q: Why are so many consumers filing bankruptcy?
A: Many Americans with excess debt have acquired that debt over a long period of time. While the great majority fully intend to repay their debts, they may find themselves unable to do so because of unanticipated changes in their financial circumstances caused by medical emergencies, job losses, failed businesses, disability, divorce or the death of a “bread-winning” spouse. Any of these circumstances, particularly combined with late payment or over-the-limit fees and high interest rates can result in insurmountable debt.
In addition, credit is more readily available now than in the past, and that access has led many to financial problems. Health care has also become markedly more expensive over the years, and a single accident, illness or injury (or the need for long-term treatment for a chronic condition) can result in tens or hundreds of thousands of dollars in medical expenses.
Q: What alternative courses of action are there to filing bankruptcy?
A: Short of bankruptcy, a debtor may attempt to mediate with creditors or negotiate workout agreements to extend due dates, lower interest rates, partially forgive debt or alter terms of repayment. A debtor could also may execute an “Assignment of Property for the Benefit of Creditors” (known as an “ABC”), wherein the debtor puts assets in the trust of a neutral third party to pay creditors. A business debtor has the option to sell his or her business, negotiating the satisfaction of debt as part of the deal. Options to bankruptcy do exist, but many creditors are unwilling to agree to reasonable term modifications and are not interested in negotiation.