It seldom takes time before bankruptcy emerges as a common term used in the discussions. The legal side of bankruptcy is critical for either an individual or a business owner to make informed, strategic decisions. At the heart of this is your bankruptcy attorney, your navigator through the legal maze.
Here follows the crux of legal aspects involved in bankruptcy and how important it is for the right attorney to either make or break your case.
Understanding Bankruptcy: The Legal Fundamentals
Bankruptcy is a federal legal procedure that provides for the relief of an individual or a company to eliminate or repay debts under the protection of the court. The U.S. Bankruptcy Code provides different types or “chapters” of bankruptcy, with each one containing different rules and outcomes.
The Most Common Types Are
- Chapter 7: The liquidation of assets to repay debts, mostly for individuals or businesses that are completely shut down.
- Chapter 11: For the reorganization of businesses seeking to continue their operations while restructuring their debts.
- Chapter 13: Debt repayment plans for individuals or sole proprietors varying from 3-5 years.
These all involve legal filings, strict timelines, and dealings with creditors and trustees under court supervision.
Key Legal Aspects of Bankruptcy
Legal aspects of any bankruptcy case include:
1. Automatic Stay
The court issues an automatic stay immediately upon filing, thus stopping:
- Collections
- Foreclosures
- Lawsuits
- Wage garnishments
This gives you some legal breathing spell to work through debts away from harassment by creditors.
2. Bankruptcy Trustee
To ensure compliance with the requirements, a trustee is assigned by the court regarding contentions. The trustee may:
- Examine your financial records
- Oversee the sale of assets
- File an objection to discharge if something fraudulent is suspected
This is to ensure that all creditors are treated fairly under the law.
3. Means Test & Eligibility
In Chapter 7, individuals must pass a “means test” to prove that their income is below a certain threshold. This is calculated by your attorney, using IRS and Census Bureau data.
4. Asset Protection
Certain assets may be protected from liquidation through state/federal exemptions. Your attorney will assist you in protecting:
- Your home
- Retirement accounts
- Tools you need for your trade
- Personal belongings
This post was written by Trey Wright, an experienced bankruptcy lawyer Jacksonville FL! Trey is one of the founding partners of Bruner Wright, P.A. Attorneys at Law, specializing in bankruptcy law, estate planning, and business litigation.
The information provided on this website does not, and is not intended to, constitute legal advice; all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information. This website contains links to other third-party websites. Such links are only for the convenience of the reader, user or browser; the ABA and its members do not recommend or endorse the contents of the third-party sites.