As a business owner, you have several aspects of your organization to manage, from salaries…
In Some Cases, Can Bankruptcy Cause Instant Financial Relief?
Bankruptcy is an often misunderstood subject that can land people in a lot of trouble when they proceed under false information. While the court system does its best to educate would-be filers, it’s not always successful. One of the main reasons people file bankruptcy in the first place is because they hope to obtain instant relief from their financial duress. While this is possible, you should understand what it entails.
Instant Relief
The moment you formally declare bankruptcy, the courts put what’s called an “automatic stay” in place. This “automatic stay” essentially “stays the hand” of any creditor trying to get their money or property back from you. Legally, they are obligated to cease any debt collection practices as soon as they’re notified of your filing (a few exceptions exist). If they continue with them, they could find themselves in front of a judge.
This stay isn’t necessarily permanent though, meaning nor is your instant relief. However, the courts will protect you until your creditors are properly addressed.
Chapter 7 Relief
Typically, about 4 to 6 weeks after you file a chapter 7 bankruptcy, you’ll be summoned to a meeting of creditors (also called your “court date”). Your chapter 7 panel trustee will ask you a series of yes or no questions which you’ll answer in the presence of your attorney.
The trustee will be seeking to ascertain whether or not you own any non-exempt assets that could be sold in order to pay back some of your creditors. However, the majority of the time, there are no such assets to be administered. While you no doubt own property, it will be probably be protected as bankruptcy exemptions.
Chapter 13 Relief
Filing a chapter 13 bankruptcy will have much the same result. You’ll get instant relief, which will stay in place so long as you follow the repayment plan you submitted to the courts. As the courts and your secured creditors also signed off on it, you shouldn’t have any issues and your relief will remain in place.
In terms of relief, the main difference between a chapter 7 and 13 is that it lasts longer in the latter case because it has to. You’ll typically need between three to five years to repay your bankruptcy debt under a chapter 13 plan. Under a chapter 7, no such plan exists.
Motions for Relief from Stays
Don’t think you’re off the hook, though, just because you filed either chapter of bankruptcy. Anytime you violate the rules of your bankruptcy, your creditors can file a motion for relief from the stay. If granted, they’ll be legally allowed to pursue debt collection on what you owe. In the case of a mortgage, this would include foreclosing on your property.
Seeking Help with a Bankruptcy Filing
As we mentioned at the beginning, the courts won’t just let you file bankruptcy without first ensuring you understand what you’re undertaking. For example, with a chapter 7, you typically have to undergo credit counseling sometime during the six months before filing.
However, this isn’t the same as speaking with a bankruptcy attorney. Hopefully, you now have a better appreciation for how complicated this process can be if you don’t completely understand what you’re doing. While instant relief is certainly an attractive prospect, it can be taken away just as quickly for one simple mistake, leaving you with a bankruptcy on your record, yet none of the benefits.
Call Tyler, Bartl & Ramsdell, P.L.C. today at (703) 549-5000 for a free consultation regarding your financial troubles. You can also fill out our confidential contact form. Either way, you’ll be hearing from us soon and getting the help you need with this important decision.