Bankruptcy creates a ripple effect that touches many beyond the people and companies that file. It is best to thoroughly understand the process of bankruptcy to know what to do when encountering it as a consumer of a company that has filed for bankruptcy, as a friend or loved one of someone who has filed for bankruptcy, or as the person person filing him or herself.
Companies and individuals can file bankruptcy when they have acquired too much debt. They file a petition, which includes all debts and assets, for bankruptcy with the U.S. Bankruptcy court. Most people require the assistance of a bankruptcy lawyer because the process can be tricky, especially when deciding which of the three types of bankruptcy to file.
Chapter 13: Wage Earner Plans
One way to file for bankruptcy is with Chapter 13. It is useful for small businesses run by individuals who owe less than $807,750 in secured debt (like for a house or car) or less than $269,250 in unsecured debt. It allows those filing to keep their assets and property by making payments with a payment plan, so their business can stay running.
Some advantages of filing for Chapter 13 bankruptcy include:
- It allows you to keep all your property and your debts can be reduced with the payment plan;
- The payment plan also gives you more time to pay debts that can not be discharged (such as child support and taxes);
- You are immediately protected from creditors and wage garnishment;
- You can be released from more debts (like fraud, credit card charges, etc.);
- Co-signors are immune to it all;
- You are protected from foreclosure if you maintain your payments;
- You can separate creditors, so each one receives a different percentage of your payments—this is perfect for when there is a co-debtor with certain creditors;
- You can file chapter 13 repeatedly at any time.
There are a few disadvantages to filing for Chapter 13 bankruptcy, and they may be relevant to your specific situation:
- Things may be tight financially for a while because you will be using your income to make the payments on the plan;
- Legal fees can be higher because this route is more complicated;
- Your payment plan and debt last for three to five years, so you are in the bankruptcy process for three to five years;
- If you are a stockbroker or commodity broker, you can not file this chapter.
Contact a Bankruptcy Lawyer
The bankruptcy lawyers at Newland & Newland, LLP work diligently to help people struggling with mounting debt to file bankruptcy as smoothly as possible. We are compassionate, professional, and knowledgeable. If you are struggling with overwhelming debt, contact the bankruptcy lawyers at Newland & Newland, LLP. We help clients in the Arlington Heights, Palatine, Rolling Meadows, Libertyville, Mundelein, Buffalo Grove, Schaumburg, Elk Grove, and Itasca areas.
(image courtesy of Kim Gorga)