Bankruptcy in Fanwood, New Jersey is a court proceeding through which a person or business who is unable to pay their debt is able to have some of their debt legally eliminated, or "discharged." This theoretically allows the debtor to move on with a clean slate. 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 Fanwood, New Jersey 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 a Fanwood bankruptcy attorney cannot be substituted.
Types of Bankruptcy in Fanwood, New Jersey
There are three basic bankruptcy schemes that are most commonly used in Fanwood: Chapters 7, 13, and 11. Bankruptcy is a creation of federal law, so the procedure for filing for bankruptcy in Fanwood, New Jersey 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 proceeds from the sale to pay down as much debt as possible. Once the sale is complete, all dischargeable debt is deemed paid in full, whether or not the sale was able to raise the entire 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 Fanwood, 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 a longer period of time, thereby 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. Chapter 11 bankruptcy is almost exclusively used by businesses, but there is nothing that legally prevents it from being used by individuals, and its use by individuals is very rare. Chapter 11 bankruptcy requires the debtor to come up with a restructuring plan - telling the court how they propose to cut costs, improve their operations, and pay down their debts. The plan has to be approved by a majority vote of participating creditors.
A main advantage of Chapter 11 bankruptcy is that businesses can continue their operations while going through the process. Also, they can continue to buy and sell their stock.
How Can a Fanwood Bankruptcy Lawyer Help?
Filing for bankrtuptcy in Fanwood is a major decision with costs and benefits that must be weighed carefully. Before filing, it would be a good idea to speak with a good Fanwood bankruptcy attorney.