In Faribault, Minnesota, 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 begin over with a clean slate and move on, after having learned to better manage their use of credit in the process. Bankruptcy should be treated as an option of last resort, and should not be viewed as a fitting way to get out of debt that you just don't feel like paying. Bankruptcy can have severe consequences, including but not limited to damage to your credit rating. A bad credit score can impact your ability to acquire loans in the future, to rent an apartment, and possibly even your ability to get hired at some jobs (as some employers now run credit checks on prospective employees).
Therefore, it is a good idea to talk with an veteran bankruptcy lawyer in Faribault, Minnesota. They will be able to advise you on the likely legal and financial consequences of filing for bankruptcy, and help you determine if it's the right option for your. Because this determination depends heavily on the facts of each distinct case, the counsel of a Faribault bankruptcy attorney cannot be replaced.
Types of Bankruptcy in Faribault, Minnesota
There are three basic bankruptcy schemes that are most commonly used in Faribault: Chapters 7, 13, and 11. Bankruptcy is a creation of federal law, so the process for filing for bankruptcy in Faribault, Minnesota will be roughly the same as it would be anywhere else in the U.S. Chapter 7 bankruptcy, or "liquidation," requires the debtor to sell some of his or her property to the highest bidder, and using the funds from the sale to pay down as much debt as possible. Once the sale is done, all dischargeable debt is deemed paid in full, whether or not the sale was able to raise the full amount owed. You should note that some property (usually the types of property deemed essential) is fully or partially exempt from liquidation, meaning that the debtor gets to keep it. This includes houses, cars, and retirement accounts, among others. Some types of debts, however, cannot be discharged in bankruptcy, including taxes, child support, and student loans.
Under Chapter 13 bankruptcy in Faribault, 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. Although it can be used by individuals, Chapter 11 bankruptcy is used almost always by businesses. Not unlike Chapter 13, Chapter 11 focuses on restructuring of debt, rather than discharging it. Chapter 11 requires that the debtor come up with a reorganization plan designed to reduce debt and cut costs. Before being enforced, this plan must be approved by a majority 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 Faribault Bankruptcy Lawyer Help?
The decision to file for bankruptcy in Faribault is not one to be made easily, and it definitely should not be made without first obtaining the advice of an efficient Faribault bankruptcy attorney.