In Willimantic, 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). 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 truly 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 Willimantic, Connecticut bankruptcy lawyer. Your Willimantic bankruptcy lawyer can inform you of the costs and benefits of filing for bankruptcy, and give his or her professional opinion as to whether or not it's a good option, given your particular circumstances.
Types of Bankruptcy in Willimantic, Connecticut
There are 3 bankruptcy schemes that are commonly used in Willimantic: Chapter 7, Chapter 13, and Chapter 11 bankruptcy. Bankruptcy is governed by federal law, so the procedures in Willimantic, Connecticut are very similar to what they will be anywhere else in the United States. Chapter 7 bankruptcy requires the debtor to liquidate some of his or her property, and use the proceeds to pay creditors. While this doesn't sound like much of a relief at first glance, the upshot is that once the eligible property is sold, and the proceeds given to the creditors, all of the debtor's eligible debts are deemed paid in full, regardless of how much the creditors actually ended up getting. Not all of the debtor's property has to be sold off - the debtor will usually be allowed to keep things like a house, at least one car, some types of personal property, retirement accounts, and insurance policies. It should be noted that some debts are not dischargeable, and will have to be paid in full even if the debtor files for bankruptcy. This includes student loans, taxes, and criminal fines.
The other common bankruptcy scheme used by consumers in Willimantic 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 approved, creditors are not allowed to attempt to collect payment under the original agreements. Though Chapter 11 bankruptcy can be used by individuals, it is almost exclusively used by businesses. Similar to Chapter 13, Chapter 11 involves restructuring of debts, rather than complete discharge. The debtor is required to come up with a restructuring plan that lays out how it plans to cut costs, streamline operations, and pay its debts. The plan must then be approved by a vote of participating creditors.
A main advantage of Chapter 11 bankruptcy is that businesses can continue their operations while going through the process. Also, they can continue to buy and sell their stock.
How Can a Willimantic Bankruptcy Lawyer Help?
The decision to file for bankruptcy in Willimantic is not one to be made lightly, and it certainly should not be made without first obtaining the advice of an experienced Willimantic bankruptcy attorney.