In Preston, Connecticut, bankruptcy is a court procedure in which a person or business has some or all of their debts cleared (or "discharged"), theoretically allowing them to begin 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). However, bankruptcy should not be treated as a way to avoid debt that one simply doesn't feel like paying. It is meant to be a safety net for people or businesses who are honestly unable to pay off their debts. Because bankruptcy is not without negative consequences (such as a severely damaged credit rating for many years afterward), it should be viewed as an option of last resort.

Accordingly, you should speak with a good Preston, Connecticut bankruptcy lawyer. Your Preston bankruptcy lawyer can inform you of the costs and benefits of filing for bankruptcy, and give his or her professional advice as to whether or not it's a good option, given your individual circumstances.

Types of Bankruptcy in Preston, Connecticut

There are 3 bankruptcy options that are commonly used in Preston: Chapter 7, Chapter 13, and Chapter 11 bankruptcy. Bankruptcy is governed by federal law, so the procedures in Preston, Connecticut are very similar to what they will be anywhere else in the United States. 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 proceeds to pay off debt. Varied 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 popular bankruptcy system in Preston is Chapter 13 bankruptcy. Under this system, the debtor's debts are restructured, instead of discharged. This involves creating a new repayment plan that the debtor will find manageable, given his or her income, and that will result in the creditors being paid in a reasonable amount of time. When a repayment plan is approved by a court, creditors are legally barred from attempting to collect under the original terms of their contract with the debtor. Chapter 11 bankruptcy is usually used by businesses, though it can be used by individuals (which is quite rare). Chapter 11 bankruptcy requires that the debtor come up with a reorganization plan - basically telling the court how they propose to cut costs, streamline their operations, and pay their debts. This plan must be approved by the participating creditors through a simple majority vote.

During the Chapter 11 process, a business can normally continue its operations, and the stock can be traded, even if it is de-listed from a major stock exchange.

How Can a Preston Bankruptcy Lawyer Help?

The need to consider all the options and consider the costs and benefits of filing for bankruptcy in Preston cannot be overstated. If you are considering filing for bankruptcy, it would be a good idea to speak with a Preston bankruptcy attorney beforehand.