Filing for bankruptcy protection is not something most people would want to do, yet many are faced with the unfortunate reality of having to file for bankruptcy protection. Bankruptcy is essentially a legal procedure through which individuals or other entities who can’t pay debts owed to creditors can seek relief from some, if not all, of their outstanding debts. In many states, bankruptcy is legally imposed by a bankruptcy court order, usually initiated by the bankrupt consumer who must seek legal aid from someone similar to this Harrisburg bankruptcy attorney who could help them with their case. The filing is an option only, and no one can force you to file bankruptcy if you don’t want to see our Director insolvency advice.
The other major type of bankruptcy is debt settlement, also known as debt arbitration. In this process, a third party will mediate a payment plan that, hopefully, will be sufficient to satisfy both the debtor and the creditor. Another way to state this is that bankruptcy protection is used to reduce the total amount due on student loans. As has been stated previously, federal bankruptcy law does not allow student loans to be discharged. But the student loan discharged in such cases will have a substantially lower interest rate than the one the borrower would have if the student loan had remained in good standing.
Bankruptcy reorganization is not the same as bankruptcy dissuade creditors from harassing debtors. According to bankruptcy law, when a debtor files for bankruptcy protection, his/her first step should be to request a reorganization plan. This is similar to requesting a new loan. As a result of this request, the creditor will negotiate payment terms with the debtor and attempt to reach a reasonable agreement. If these efforts prove unsuccessful, the creditor will file for bankruptcy protection and resume collection efforts, but this later action does not occur until after a final settlement has been reached with the debtor.
The next step that any individual debtor must attend is credit counseling. This step occurs when the individual realizes that bankruptcy protection is not an appropriate option for his/her financial situation. An accredited credit counseling agency is the entity that individual debtors must attend if they decide to utilize this method of repayment. It can also open a few more doors to finding a solution to avoid bankruptcy. For instance, by studying and employing a secured party creditor process, a debtor can secure their assets by getting financial aid from a creditor. They can even apply for membership to easily get such facilities based on the service provider’s interest in the collateral assets.
However, a significant drawback to using credit counseling services is that this option is not permitted by most bankruptcy laws. Bankruptcy laws usually restrict creditors from pursuing non-asset-based debts (i.e. taxes, child support, etc. ).
Although credit counselors are generally helpful and capable, they can’t help with debts that are primarily consumer debts. Consumer debts are unsecured debts that are mainly fulfilled through the use of credit cards. In some instances (for example, when a consumer fails to pay a bill in full), creditors can file a petition in a bankruptcy court to regain the outstanding balance. If a judge agrees with the creditors, the debtor may be forced to pay the entire bill. Creditors do not usually want to lose this type of money, so it’s very rare that they will simply allow the debtor to be declared bankrupt.
The other option available to a creditor is to reorganize. Usually, when a person files for bankruptcy protection, he/she no longer has any assets/income and becomes unable to pay any more debt/s. In order to reorganize one’s financial affairs, an accredited credit counselor will organize a reorganization plan. Under this plan, the client will pay a monthly fee to the agency in return for them negotiating with the creditors on behalf of the client. Since the fee is often relatively small, the process of reorganizing a client’s affairs can be a relatively inexpensive and timely one.
Bankruptcy laws state that all debts that become due after the effective date of the bankruptcy policy become fully dischargeable. This means that all debts are settled once the bankruptcy case is complete. However, discharged debts are not necessarily set free. A discharge is only achieved if the financial institutions agree upon terms, and if the applicant can show that they have a fresh start at least on the financial front.
