Bankruptcy in Delaware is a legal process through which some of the debts of an individual or a business are absolved (excused). You should not view bankruptcy as an opportunity to eliminate your debts just because you don't feel like paying them - it can be a long and difficult procedure. Bankruptcy is designed to be a last resort to prevent complete financial ruin, while allowing creditors to collect at least some of their debts in an orderly fashion. Filing for bankruptcy can have major negative effects on one's credit score, which will make it more difficult to get loans in the future.
Accordingly, if you are considering bankruptcy as an option, you need to thoroughly examine the costs and benefits. A good Delaware bankruptcy lawyer can advise you as to the pros and cons of bankruptcy, and give his or her expert opinion about whether or not bankruptcy is a good option, based on the facts of your distinct case.
Types of Bankruptcy in Delaware
Bankruptcy is governed by federal law, so the procedures in filing for bankruptcy in Delaware will be the same as everywhere else in the United States. There are 2 basic forms of bankruptcy that consumers typically use: Chapter 7, and Chapter 13, owing their names to where they are found in the U.S. Bankruptcy Code. Additionally, there is a form of bankruptcy normally used by businesses called Chapter 11. Chapter 11 is available to individuals, but it is rarely the best option for them.
In Delaware, Chapter 7 bankruptcy is known as "liquidation." When a person files for Chapter 7 bankruptcy, a trustee is appointed by the bankruptcy court to do an accounting of the debtor's property. The trustee then determines what pieces of property, if any, should be sold off to pay off the debts. Many forms of property are exempt from forced sale up to a certain dollar amount, including houses, cars, and retirement accounts. Once the property is sold, any remaining dischargeable debt is eliminated. Chapter 13 bankruptcy normally reorganizes, rather than discharges, one's debts. Essentially, the court will come up with some type of repayment plan, independent of the terms of the agreements that created the debt in the first place (superseding any acceleration clauses). This is meant to give the debtor some breathing room, allowing them to repay their debts over time, without facing financial ruin in the process.
Chapter 11 bankruptcy is typically used by businesses, rather than individuals. Much like Chapter 13, it involves reorganization of debts. It compels the debtor to come up with a reorganization plan, but this plan has to be approved by a majority vote of participating creditors. Once it is approved, the company is obligated to carry it out.
How Can a Delaware Bankruptcy Lawyer Help?
Filing for bankruptcy can be a life-changing decision. Depending on the circumstances, it can change your life for the better, or worse. A Delaware bankruptcy lawyer can help you figure out if bankruptcy is a viable option for your specific situation.