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Call Us At : 205-982-3325
When you consider filing for bankruptcy, you may have many questions about what can happen in a bankruptcy case. Here are the answers to some common questions individuals and businesses ask about bankruptcy proceedings. Contact Gina H. McDonald & Associates, LLC, to get more answers and a greater understanding of your legal options for addressing financial issues.
In bankruptcy, an individual or business organization that cannot afford to repay debts can obtain relief from creditors through a court-supervised legal process. Bankruptcy provides debtors with a fresh start, either by eliminating debts through the liquidation of assets and discharges or by restructuring debts into affordable repayment plans.
Federal law governs the bankruptcy process through the U.S. Bankruptcy Code. However, state law governs several aspects of bankruptcy cases, including the designation of assets that a debtor may exempt from a bankruptcy proceeding.
An individual or business may need to file for bankruptcy when their debts have become unmanageable, as bankruptcy can allow them to pay off and discharge debts or reorganize them into more affordable payments. Signs that a person or business should consider filing for bankruptcy include:
Individuals and businesses may have alternatives that can help them resolve their debts without the disadvantages of bankruptcy. An experienced attorney from Gina H. McDonald & Associates, LLC, can review your financial circumstances to walk you through your legal options and help you make an informed decision about whether to pursue bankruptcy.
The Bankruptcy Code provides several options for bankruptcy. Individuals and businesses may have options for the type of bankruptcy they pursue, based on their financial circumstances, debt load, and income. The most common forms of bankruptcy include Chapter 7, 11, and 13 bankruptcy.
Chapter 7 bankruptcy allows an individual or business to liquidate their assets. During Chapter 7, a debtor sells most or all of their assets to generate funds to pay back creditors. In Chapter 7 personal bankruptcy, an individual may have most of their remaining debts discharged by the bankruptcy court after liquidation. When a business files for Chapter 7 bankruptcy, it shuts down and dissolves, but the business’s owners may remain liable for debts that remain after liquidation.
Chapter 11 bankruptcy provides a method for businesses to reorganize their debts and operations, allowing them to repay loans and work towards becoming a profitable enterprise. Businesses in Chapter 11 bankruptcy may negotiate with creditors to restructure their debts or reorganize their operations, potentially selling off assets, spinning off or shutting down unprofitable parts of the business. In Chapter 11 bankruptcy, a company will repay its debts under a court-approved repayment plan. Chapter 11 allows businesses to continue operating under the management of their owners and officers.
Chapter 13 bankruptcy enables individuals to repay their debts over several years, as outlined in a court-approved repayment plan. Chapter 13 may give individuals the opportunity to catch up on arrears or pay down large debt balances over time.
An attorney from Gina H. McDonald & Associates, LLC, can help you understand the different options for bankruptcy available to you and understand their differences so you can choose the right path for your circumstances, needs, and goals.
You might worry that filing for bankruptcy will require you to sell everything you own. The good news is that only Chapter 7 bankruptcy requires you to sell (liquidate) your assets. Chapter 11 or 13 bankruptcy allows debtors to retain their property as “debtors-in-possession” and repay debts over time.
Even if you file for Chapter 7, you may not lose everything you own. In Chapter 7 personal bankruptcy, an individual gets to keep specific “exempt” assets under state law. For example, debtors may receive a “homestead” exemption that protects a particular amount of equity in a personal residence owned by the debtor. Debtors may also get a personal property exemption that allows them to keep personal items up to a specific aggregate value. Bankruptcy laws also allow Chapter 7 debtors to retain certain assets, including workers’ compensation or Social Security benefits, tax-qualified retirement accounts, clothing, tools and equipment used in a business, and burial plots.
Individuals who file for bankruptcy may have concerns about how a bankruptcy filing may affect their credit score. In most cases, filing for bankruptcy can result in an immediate and significant decrease in a person’s credit score. However, their credit score may begin to rebound soon after filing for bankruptcy as they pay off debts through a Chapter 7 liquidation or a Chapter 13 repayment plan.
A bankruptcy filing can continue to negatively impact a person’s credit score as long as it remains on their credit report. Bankruptcies remain on a credit report for up to 10 years from the filing date. Individuals can start rebuilding their credit after filing for bankruptcy by paying debts on time and avoiding accumulating balances.
Filing for bankruptcy can temporarily stop a wage garnishment, repossession, or foreclosure proceeding. When you file a bankruptcy petition, the law imposes an automatic stay on your creditors, barring them from beginning or continuing any efforts to collect debts, including sending debt collection notices, repossessing property, or pursuing legal action. A creditor must ask the bankruptcy court for relief from the automatic stay to resume collection efforts during the bankruptcy case.
A bankruptcy case can halt a foreclosure or repossession of an asset that serves as collateral for a debt if the debtor reaffirms the debt (agrees to continue paying it) or redeems the asset by paying the creditor the fair market value. Chapter 13 bankruptcies also allow debtors to catch up on missed payments for secured debts, such as mortgages or car loans.
“If I file Bankruptcy, can I keep my car?” This is a common question of debtors when contemplating a bankruptcy filing. Without a vehicle, how can the debtor get to work, take his children to school, or even think about availing himself of his so-called “fresh start.” The answer to this question depends in large part on the applicable state property exemptions, as well as the fair market value of the debtor’s vehicle and the amount of equity he has in it.
At the conclusion of a personal bankruptcy case, the bankruptcy court can discharge various types of personal unsecured debts, including personal loans, credit card balances, and medical bills. However, the law prohibits discharging certain other debts, such as student loans, unpaid taxes, or arrears for child or spousal support.
Although bankruptcy courts do not require you to have legal representation to file a petition, hiring a bankruptcy attorney can make the legal process much easier. Bankruptcy cases involve complex forms and court procedures, including disclosing assets, listing debts, and developing repayment plans. Errors or omissions in bankruptcy filings, even when they occur inadvertently, can jeopardize a bankruptcy case by giving the court grounds to dismiss the petition.
A bankruptcy attorney can help you submit complete and correct filings and meet all the deadlines in your case. They can also advocate for you during court hearings or meetings with creditors, protecting your rights and interests and helping you secure the best possible outcome to your case.
If you have questions about what filing for bankruptcy might mean for you or your business, an experienced attorney can provide the guidance and support you need. Contact Gina H. McDonald & Associates, LLC, today for a free, confidential consultation with an experienced bankruptcy attorney to discuss your options and get answers to your questions about what to expect when filing for bankruptcy in Birmingham, Hoover, Anniston, Tuscaloosa and the rest of Alabama.
