Bankruptcy in Holmdel, New Jersey is a court procedure through which a person or business who is unable to pay their debt is able to have some of their debt legally excused, 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 really 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.
Therefore, it is advisable to consult with an experienced Holmdel, 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 Holmdel bankruptcy attorney cannot be replaced.
Types of Bankruptcy in Holmdel, New Jersey
There are three basic bankruptcy schemes that are most commonly used in Holmdel: Chapters 7, 13, and 11. Bankruptcy is a creation of federal law, so the process for filing for bankruptcy in Holmdel, New Jersey 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 funds 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 directed 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 Holmdel, 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 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.
A major advantage of Chapter 11 bankruptcy is that businesses can continue their operating while going through the process. Also, they can continue to buy and sell their stock.
How Can a Holmdel Bankruptcy Lawyer Help?
Filing for bankruptcy in Holmdel is a very important decision, and should not be made easily. Before filing, one should consult with a seasoned Holmdel bankruptcy attorney for assistance.