Debt and Bankruptcy
How To

How to Understand Bankruptcy Proceedings?

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Wiki User
08/21/2012

No one wants to declare bankruptcy. Most people will go out of their way to avoid it. Although the rules have changed so that the debtor must find a way to pay back his creditors if possible, there are still situations where going through insolvency proceedings is better than hiring a debt settlement company.

A person in the United States can file for different bankruptcy chapters. Chapter 7 involves the debtor liquidating his debts to pay off debts quickly. Chapter 11 involves paying off debtors where possible and getting debts that cannot be paid back forgiven.

People who think that declaring bankruptcy might be the best option for them should contact a lawyer first. Attorneys do not recommend this option if it is not the best option for their client.

Unlike debt settlement, filing under Chapter 11 or Chapter 7 requires a person to go before a judge. The judge does not hear these cases to determine anyone’s guilt or innocence. The Administrative Law Judge is there to ensure that all parties reach an equitable solution. He will also explain the final rulings to all parties involved, if it is necessary to do so.

Lawyers do charge for bankruptcy services, although people can file the paperwork by themselves. If a person decides to go the do-it-yourself legal route, he should familiarize with the law and the courtroom procedures. Odds are that creditors who care enough about the money that a debtor owes them will hire a lawyer to get the money that they are owed.

Consumers who declare bankruptcy should know that the declaration remains on their credit report for up to seven years. Getting the debts written off makes it possible for a person to slowly rebuild his credit rating and get back on track. The bankruptcy laws were designed to give people who screwed up at some point in their lives a second chance. It is still better to avoid these situations in the first place.