Bankruptcy is a fairly common occurrence due to situations of financial instability; however, people fear to file for it due to the incorrect notions surrounding them. It is a legal proceeding that allows individuals or businesses with insufficient income and extreme debts to be relieved from their burden while providing compensation to the creditors.
A lot of people are concerned about losing their assets such as homes and cars. The law protects at least some equity of your house. Consulting a bankruptcy lawyer is always advisable for proper guidance and favorable results. A Katy bankruptcy lawyer can help you regain control over your finances and ease your anxiety over paying off debts. They help you understand your options and whether it is the most favorable option for you and your future.
Bankruptcy can be a result of several reasons such as unemployment, large amounts of debts, education loans, emergency expenditures like hospital bills. Once you file a claim for bankruptcy in court, you’re protected by the law’s automatic stay, which does not allow creditors to collect their dues until the completion of the proceedings. If the case ceases, it lifts the stay. The automatic stay is exempt in some cases, such as child alimony cases, and if the value of the amount owed depreciates while proceedings are carried on.
What is Chapter 7 bankruptcy?
The debtor’s nonexempt assets are liquidated and sold. The proceeds are used to pay creditors according to the bankruptcy code. If the equity on your house or a portion of it is exempted, creditors cannot sell it to acquire funds; you will keep your home. A homestead exemption is granted to debtors so they can retain at least some of their property.
What is Chapter 13 bankruptcy?
Chapter 13 helps create a plan to repay their debts or at least a part of it in several installments. It lasts over 3-5 years, depending on the amount and nature of their debts. It does not cause the loss of any properties and avoids any foreclosure proceedings that could occur. It is advantageous and makes you debt-free in a short span of years. Having a stable income and budgeting properly helps debtors in making timely payments.
Heavy debts with their high-interest rates with low income deteriorate a person’s mental health. Clearing them immediately or in a short period enables debtors to have better mental and financial stability. It protects them from creditors who might harass them for their money back, and it also ensures that creditors receive monetary compensation to settle with the debtor.