Bankruptcy in Covington, Washington is a court procedure which allows an individual or business who is drowning in debt to be absolved of their legal requirement to pay off some or all of their debt. Hopefully, this will allow both the debtor and creditors to move on with their lives. However, bankruptcy is not a free ride, allowing someone who simply doesn't feel like paying their debts to get out of that legal requirement. It is designed to prevent debt which has minimal chance of ever being paid back from ruining the life and finances of the debtor. It also carries significant long-term consequences, which must be carefully weighed against the potential benefits. For example, bankruptcy makes it very difficult for the debtor to obtain credit in the near future.
For that reason, it would be advisable to speak with a good Covington, Washington bankruptcy attorney. This attorney will be able to advise you as to whether or not filing for bankruptcy is a good idea, given your individual situation. This determination is highly dependent on the details of each individual case, so a Covington attorney's advice is absolutely indispensable.
Types of Bankruptcy in Covington, Washington
There are three basic bankruptcy schemes that are most commonly used in Covington: Chapters 7, 13, and 11. Bankruptcy is a creation of federal law, so the process for filing for bankruptcy in Covington, Washington will be roughly the same as it would be anywhere 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. Varied 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.
Under Chapter 13 bankruptcy in Covington, 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 prolonged period of time, thus 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 accessible to individuals, Chapter 11 bankruptcy is generally used by businesses. Like Chapter 13, Chapter 11 requires the restructuring of debts. Under this system, the debtor must come up with a plan to reduce debt, cut costs, and improve operations. Once this plan is presented, it is submitted to the participating creditors, who must approve it by a majority vote before it can be implemented.
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 Covington Bankruptcy Lawyer Help?
The decision to file for bankruptcy in Covington is not one to be made easily, and it definitely should not be made without first obtaining the advice of an accomplished Covington bankruptcy attorney.