In Winthrop, Maine, 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 begin 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 heavily damaged credit rating for many years afterward), it should be viewed as an option of last resort.
Accordingly, it might be a good idea to consult with a Winthrop, Maine bankruptcy attorney. Your lawyer will be able to counsel you about your options, including alternatives to bankruptcy, if such alternatives exist in your case. Whatever the result, it is often difficult to foresee the long-term consequences of any bankruptcy-related decisions, so the advice of a bankruptcy in Winthrop could prove invaluable.
Types of Bankruptcy in Winthrop, Maine
There are three basic bankruptcy schemes that are most commonly used in Winthrop: Chapters 7, 13, and 11. Bankruptcy is a creation of federal law, so the process for filing for bankruptcy in Winthrop, Maine will be roughly the same as it would be anywhere else in the U.S. Chapter 7 bankruptcy involves liquidation of part of the debtor's assets to pay off as much of his or her debt as possible. Once the liquidation is complete, and the proceeds given to the creditors, the rest of the debt is discharged. Liquidation is essentially selling assets to the highest bidder. Only some of the debtor's assets have to be sold, and various classes of property are exempt, meaning that the debtor can keep them, including homes, cars, insurance policies, and retirement accounts. It should be noted that certain types of debt cannot be discharged through Chapter 7 bankruptcy, including student loans, child support payments, criminal fines, and recent taxes.
The other popular bankruptcy system in Winthrop 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 decent amount of time. When a repayment plan is authorized by a court, creditors are legally barred from trying to collect under the original terms of their agreement with the debtor. Though Chapter 11 bankruptcy can be used by individuals, it is almost always 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 authorized by a vote of participating creditors.
One advantage of Chapter 11 bankruptcy is that it allows a business going through it to continue operating, and to trade its stock.
How Can a Winthrop Bankruptcy Lawyer Help?
One should not make the decision to file for bankruptcy in Winthrop easily. Before making any such decision, it would be highly advisable to contact an experienced Winthrop bankruptcy attorney.