In Arlington, Massachusetts, bankruptcy is a legal proceeding in which a person or business has some or all of their debts legally excused, when they are unable to pay them. This hopefully allows them to start over with a clean slate and move on, after 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.
Therefore, it is prudent to consult with an experienced Arlington, Massachusetts bankruptcy attorney, who can advise you of the costs and benefits of bankruptcy. Because the decision to file for bankruptcy depends very heavily on the facts of each individual case, the advice of an Arlington bankruptcy attorney cannot be substituted.
Types of Bankruptcy in Arlington, Massachusetts
There are three basic bankruptcy schemes that are most commonly used in Arlington: Chapters 7, 13, and 11. Bankruptcy is a creation of federal law, so the procedure for filing for bankruptcy in Arlington, Massachusetts will be roughly the same as it would be anywhere 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 proceeds 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 commonly used bankruptcy system in Arlington is Chapter 13 bankruptcy. This allows a debtor to repay most or all of their debts in a structured manner. It reorganizes the debt into lower periodic payments that, with a bit of frugality, the debtor should find manageable. This allows the debtor to continue to earn a living, and allows the creditors to eventually collect what they are owed. Once a repayment plan is approved by the bankruptcy court, creditors are legally barred from seeking repayment under the terms of the agreements that gave rise to the debt in the first place, and will instead have to accept payment under the new plan. Chapter 13 bankruptcy is usually a better option for people who have a steady income. Chapter 11 bankruptcy is primarily 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 - essentially 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.
One main 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 Arlington Bankruptcy Lawyer Help?
The need to weigh all the options and consider the costs and benefits of filing for bankruptcy in Arlington cannot be overstated. If you are considering filing for bankruptcy, it would be a good idea to speak with an Arlington bankruptcy attorney beforehand.