Common Bankruptcy Questions

Yee Law Group Inc. > Common Bankruptcy Questions

Estate Planning Lawyer

Most people only have a vague idea of how bankruptcy works. When people think of someone filing for bankruptcy they imagine rich people being dragged from their houses while all of their gaudy possessions are thrown into boxes. The truth is far less dramatic but can seem more convoluted. If you are looking to file for bankruptcy, or in general have no way to pay off your debts, these are probably some of the questions you are asking.

What Is Bankruptcy?

In the simplest sense, bankruptcy is a system that allows individuals and businesses to go to court in order to get their debts canceled. Depending on the type of bankruptcy being filed for, the amount of debt and the amount of personal wealth the person has all play a role in determining how the debt gets discharged.

Do I Need a Lawyer?

Debt relief is a very personal thing and can become necessary through no fault of the person filing. Even so, since anyone filing for bankruptcy is going through a court system, having a lawyer to help navigate the technicalities and legal jargon can be a huge help. While it is not required like in criminal or civil courts, having a lawyer is highly recommended.

What Are the Different Types of Bankruptcy?

A business or individual can file under two different chapters: Chapter 7 and chapter 13. Chapter 7 bankruptcy is the more straightforward of the two: the court reviews all property and income of the person filing. Once the value of their property, along with whether any property is exempt, is determined, the court appoints a trustee to oversee the selling of the debtor’s property. All of this money goes to paying back the creditors and any debt left is discharged. This is the type of bankruptcy that most people imagine when they think about filing for bankruptcy.

Chapter 13 bankruptcy, on the other hand, is a bit less straightforward. The debtor agrees to a court-mandated repayment plan in exchange for getting to keep all of their property. Income, the amount of debt and other factors analyzed by the court determine how much the debtor must repay, and how that repayment is structured. Generally, payment plans are between three and five years long. At the end of the repayment plan, if all payments were made on time, then any remaining debt is discharged.