In Kennett Square, Pennsylvania, bankruptcy is a judicial process in which the debts of a person or business can be excused or restructured. This allows the debtor to climb out of a financial hole, and move on with a clean slate, which is often more economically feasible than requiring the debtor to pay off everything they owe. Of course, one should never view bankruptcy as a "get out of debt free" card, allowing someone to be relieved of their requirement to pay their debts just because they don't want to. It is meant to serve as a lifeline, preventing uncontrollable debt from resulting in complete financial ruin. Accordingly, it is best treated as an option of last resort, because it can carry with it significant negative consequences, which must be weighed against the possible benefits. For example, filing for bankruptcy can heavily damage a person's credit rating.
Therefore, it is advisable to consult with an experienced Kennett Square, Pennsylvania 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 Kennett Square bankruptcy attorney cannot be replaced.
Types of Bankruptcy in Kennett Square, Pennsylvania
In Kennett Square, Pennsylvania, there are 3 types of bankruptcy in common use: Chapter 7, Chapter 13, and Chapter 11. Because bankruptcy is a result of federal law, the procedures governing bankruptcy in Kennett Square, Pennsylvania will be similar everywhere else in the U.S. Chapter 7 bankruptcy involves liquidation of many of the debtor's assets in order to pay off as much of the debt as possible. This sounds harsh, but there is an upside: once the liquidation is complete, the debts are legally viewed as having been paid in full, whether or not the full amount was covered by the liquidation. Liquidation involves selling some personal property, and using the funds to pay off debt. Many types of property are exempt from liqudiation, and therefore may not need to be sold. They include homes, cars, and insurance policies, among others. You should know that some types of debt cannot be discharged in Chapter 7 bankruptcy, including taxes, student loans, and child support.
The other popular bankruptcy system in Kennett Square 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. Chapter 11 bankruptcy is almost always 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, fix their operations, and pay down their debts. The plan has to be approved by a majority vote of participating creditors.
One major advantage of Chapter 11 bankruptcy is that it allows businesses to continue their operations while the process plays out. Furthermore, their stock can still be bought and sold.
How Can a Kennett Square Bankruptcy Lawyer Help?
The decision to file for bankruptcy in Kennett Square is not one to be made easily, and it definitely should not be made without first obtaining the advice of an experienced Kennett Square bankruptcy attorney.