In Litchfield County, Connecticut, bankruptcy is a court procedure in which a person or business has some or all of their debts excused (or "discharged"), theoretically allowing them to start with a clean slate, and move on with their lives no longer drowning in debt (and hopefully having learned to better manage their use of credit in the process). Remember, though, that bankruptcy should not be viewed as a convenient way to get out of debt that you don't feel like paying back. It is meant to serve as an option of last resort for people and businesses faced with debt that they will probably never be able to pay back. The decision to file for bankruptcy can result in negative consequences, such as damaged credit ratings, which must be seriously weighed against the potential benefits.

Accordingly, it might be a good idea to consult with a Litchfield County, Connecticut bankruptcy attorney. Your lawyer will be able to counsel you about your options, including alternatives to bankruptcy, if such alternatives exist in your case. Whatever the result, it is often difficult to foresee the long-term consequences of any bankruptcy-related decisions, so the advice of a bankruptcy in Litchfield County could prove invaluable.

Types of Bankruptcy in Litchfield County, Connecticut

In Litchfield County, Connecticut, there are 3 types of bankruptcy in common use: Chapter 7, Chapter 13, and Chapter 11. Because bankruptcy is a result of federal law, the procedures governing bankruptcy in Litchfield County, Connecticut will be similar everywhere else in the U.S. Chapter 7 bankruptcy involves liquidation of many of the debtor's assets in order to pay off as much of the debt as possible. This sounds harsh, but there is an upside: once the liquidation is complete, the debts are legally viewed as having been paid in full, whether or not the full amount was covered by the liquidation. Liquidation involves selling some personal property, and using the funds to pay off debt. Many types of property are exempt from liqudiation, and therefore may not need to be sold. They include homes, cars, and insurance policies, among others. You should know that some types of debt cannot be discharged in Chapter 7 bankruptcy, including taxes, student loans, and child support.

The other frequent bankruptcy scheme used by consumers in Litchfield County is Chapter 13 bankruptcy. In this system, debt is not discharged. Instead, it is restructured. This allows the debtor to have the terms of the agreements that gave rise to their debts in the first place thrown out, and replaced with new terms that call for a structured repayment plan, designed to allow the debtor to survive on whatever income they have, and allowing the creditors to get paid back eventually. Once a payment plan is authorized, creditors are not allowed to attempt to collect payment under the original agreements. Though available to individuals, Chapter 11 bankruptcy is mostly used by businesses. Like Chapter 13, Chapter 11 requires the restructuring of debts. Under this system, the debtor must come up with a plan to reduce debt, cut costs, and improve operations. Once this plan is proposed, it is submitted to the participating creditors, who must approve it by a majority vote before it can be implemented.

One major advantage of Chapter 11 bankruptcy is that it allows businesses to continue their operations while the process plays out. Furthermore, their stock can still be bought and sold.

How Can a Litchfield County Bankruptcy Lawyer Help?

One should not make the decision to file for bankruptcy in Litchfield County easily. Before making any such decision, it would be highly advisable to contact an experienced Litchfield County bankruptcy attorney.