In East Longmeadow, Massachusetts, bankruptcy is a legal proceeding in which a person or business has some or all of their debts legally cleared, 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 really 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 East Longmeadow, 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 East Longmeadow bankruptcy attorney cannot be substituted.

Types of Bankruptcy in East Longmeadow, Massachusetts

There are three basic bankruptcy schemes that are most commonly used in East Longmeadow: Chapters 7, 13, and 11. Bankruptcy is a creation of federal law, so the procedure for filing for bankruptcy in East Longmeadow, Massachusetts will be roughly the same as it would be anywhere else in the U.S. 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 appropriate 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 typically 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.

Under Chapter 13 bankruptcy in East Longmeadow, most of the debtor's debt is not discharged. Instead, the bankruptcy court, working with the debtor and participating creditors, work out a payment plan that allows the debtor to pay off most of his or her debts over an extended period of time, therefore theoretically making the debt far more manageable. Once a payment plan is approved by the court, creditors are prohibited from attempting to collect payment under their original agreements that gave rise to the debt in the first place. Though applicable to individuals, Chapter 11 bankruptcy is typically 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 finalized, it is submitted to the participating creditors, who must approve it by a majority vote before it can be implemented.

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

How Can a East Longmeadow Bankruptcy Lawyer Help?

The decision to file for bankruptcy in East Longmeadow is not one to be made lightly, and it certainly should not be made without first obtaining the advice of an efficient East Longmeadow bankruptcy attorney.