How Does Bankruptcy Work for Debtors and Creditors?
Bankruptcy is a legal measure that is designed to help individuals and businesses restructure, repay, and even eliminate their debts under the protection of the bankruptcy court. There are essentially two types of bankruptcy, reorganization, and liquidation, and both have rules and exceptions associated with them. Which particular form of bankruptcy is most suitable for your situation depends both on your situation itself and your finalized goals. A common question we are asked for anyone facing a potential bankruptcy on either side is How does bankruptcy work for debtors and creditors?
A Brief Overview of Bankruptcy
The basic idea of bankruptcy is that every 7 years, people should have the ability to have their acquired debts forgiven. Bankruptcy laws are a legal avenue in which people can get their freedom from their debts, and are important to protect debtors against predatory lenders. A predatory lender is an individual or business that lends money to someone and then makes is purposefully difficult to repay the debt through the use of high-interest rates, finance charges, excessive late fees, and administrative difficulty. These types of lenders use these predatory methods to generate more income for themselves at the downfall of the debtor. They may only lend you 50, 100, 200 dollars, but often see their profit of return at 200-400 percent.
Any individual filing bankruptcy is telling the court three basic things:
- I can no longer afford to pay back my debts.
- I don’t have anything that you would be able to sell to pay my creditors.
- I am an honest person. I thought I would be able to repay the debt, but circumstances got in the way and I just couldn’t get ahead again.
Bankruptcy was specifically created for the types of people that these three basic tenants apply to. Bankruptcy can provide a fresh start without the need for harassment from creditors. However, it remains important as a debtor to consider what the alternatives are. Are you struggling to pay the debt? Do you need to get some relief from the constant pressure and start over?
Debtor Alternatives to Bankruptcy
An exploration of non-bankruptcy alternatives is always important when considering whether or not filing for bankruptcy is your most viable option. We have found that many debtors feel that bankruptcy is a quick escape from the existential pressures caused by debt weight down upon them, but hasty decision making in this situation is never a good idea. With a realistic budget for monthly expenditures excluding existing debt service, you may find that the left over money is enough to pay off many of your debts.
If you alternatively find that you will likely be unable to pay off the debts on the present terms, there are resources available to help in such a situation. These organizations are generally non-profit and can help with making a budget and negotiating repayments to your creditors.
Bankruptcy and Creditors
Creditors experiencing the bankruptcy of a debtor have a unique set of circumstances dependent on what type of bankruptcy was filed, how the claim was initiated, and what takes place with the bankruptcy case.
Creditors do have the right to claim assets from debtors claiming bankruptcy. Bankruptcy laws allow creditors to appear at hearings, and additionally have the right to the reclaiming of their debt through liquidation or additional means.
Often when creditors have received a bankruptcy notice, they stop pursuing the debt. Granted it is legally required that a creditor stop collection activities entirely, there is no reason to give up on reclaiming what is rightfully yours. It is a common misconception that once the process of bankruptcy begins, that creditors no longer have rights or alternative methods in regards to their claim against a debtor, but this just isn’t true.
Finding the Right Bankruptcy Lawyer
Choosing a bankruptcy lawyer is very much like the hiring of a coach or general manager of a football team. A successful outcome is never fully assured, but without the proper individual at the helm, a positive outcome would seem nearly impossible.
In the field of bankruptcy law, communication, and litigation are almost as important as experience and education of the law itself. A lawyer with substantial experience in the field of bankruptcy is vital to a positive outcome in the case.
Miami Bankruptcy Lawyer
How does bankruptcy work for debtors and creditors? We have the answer. Our bankruptcy and creditor rights attorneys represent creditors affected by debtor bankruptcy issues. The attorneys at the Law Offices of Paul A. Humbert P.L. engage in forceful and resourceful counsel regarding the myriad of issues that can arise under the unique circumstances that accompany each and every bankruptcy case. With a broad amount of experience and diverse legal specialties, our lawyers provide our clients with creative and realistic solutions to their legal needs.
We have represented banks, credit unions, companies, individuals, and other financial institutions on both a small scale, nationally, and internationally. No case is too much to handle for our attorneys and we can handle your representation in any matters that occur before, during, and after a bankruptcy case to aid you in having the legal backing to reclaim your rightful property in the event of a debtor bankruptcy situation.
If you’re currently dealing with an insolvency issue from a company, or an individual that owes you a debt and is declaring bankruptcy, contact our law office today for a consultation on the services we may be able to provide you with the resolution of your situation.