The prospect of filing a petition for bankruptcy relief can seem daunting. You may be wondering whether your circumstances really call for getting in touch with a bankruptcy law attorney. Here are some of the signs that bankruptcy might be the right choice for you.
No Light at the End of the Tunnel
Especially with Chapter 7 filings, one of the main requirements is that the filer has no realistic hope of paying down their debts any time in the coming years. Chapter 7 is a process known as liquidations where many of a petitioner's assets are sold off, proceeds are given to creditors, and the outstanding balance is canceled. It's a process that's normally used only when a person has no hope of ever getting back on their feet as long as they have to keep servicing debts that will put them further and further behind. If you're making payments on your debts and not getting ahead financially, it may be time to consider this sort of bankruptcy petition.
You Need Breathing Room
Restructuring your debts is another option. The Chapter 13 process is designed to help individuals continue paying their debts while giving them some breathing room. Repayment plans are typically set up for between three and five years. Creditors are often asked to take a reduced amount, such as 85% of what they're owed, in exchange for the debts being paid down. Once the repayment plan has been completed, the outstanding debts are then discharged by the court.
Note that Chapter 7 may be an option if a restructuring effort fails. This is an option in cases where, for example, a person's financial situation worsens for reasons that weren't anticipated at the time of the initial Chapter 13 filing.
If you run a business, the equivalent of Chapter 13 for companies is Chapter 11. A company must be properly incorporated, however. If a business has been run as a sole property, for example, the owner may have to file personal bankruptcy. Also, some farms are subject to Chapter 12, a different filing system that accounts for the year-to-year financial variations that occur in agriculture.
A person still in a position to pay down their debts is generally not eligible to file for bankruptcy. Similarly, there are limits of anywhere from two to eight years between bankruptcies. These limits vary depending on the types of petitions involved.