Bankruptcy is a federal court process intended to give financial relief from burdensome debts. Through the bankruptcy process, consumers and businesses either eliminate their debts or repay them under the protection of the bankruptcy court. Once the bankruptcy process is complete, you will typically be released from personal liability for most debts.
Chapters of Bankruptcy
Bankruptcies can generally be described as "liquidations" or "reorganizations." The most common forms of bankruptcy protection available to individuals and families are Chapter 7 ("liquidation") and Chapter 13 ("reorganization"). Businesses may file for bankruptcy protection under Chapter 7 ("liquidation") and Chapter 11 ("reorganization").
Automatic Stay
At the time of filing bankruptcy, a court order called an "automatic stay" goes into effect. The automatic stay is very powerful in that it prohibits most creditors from taking any action to collect the debts owed to them unless the bankruptcy court lifts the stay permitting the creditor to proceed with collection or enforcement. The stay arises by operation of law and requires no judicial action. Provided that the stay remains in effect, your creditors generally may not initiate or continue lawsuits, wage garnishments, or even telephone calls demanding payment.
Discuss your options with Experienced Counsel
All chapters of bankruptcy have numerous rules and exceptions as to what types of debts are covered, who can file, and what property you can and cannot keep. For these reasons, it is recommended that you seek the advice of experienced legal counsel to determine whether bankruptcy is the best option for you and whether feasible alternatives exist.
If you are considering filing for bankruptcy or would like additional information, contact The Gorski Firm, APC for a Free Consultation.