The Fundamentals of Bankruptcy

All too often, people or businesses find themselves much farther in debt than they are actually able to handle. In these cases, they may not actually be able to pay back the money they owe, even if they sell off everything they own. As a last resort, a person or a business may file for bankruptcy. Bankruptcy eliminates most debts and gives the party in financial trouble a chance to start over.

Bankruptcy Discharges

After declaring bankruptcy, most debts are eliminated and the debtor no longer owes this money to creditors. In response, creditors are no longer legally allowed to take any further steps to try to collect these debts. This may sound like a dream come true to a person or business deep in debt, and indeed bankruptcy does present the option of starting fresh. However, bankruptcy is accompanied by a number of disadvantages-- if it were really a dream come true, everyone would file for bankruptcy to rid themselves of debt.

Bankruptcy is accompanied by many penalties, and therefore it is important to thoroughly understand what bankruptcy is and how it works before filing a claim. During bankruptcy:

• Banks may liquidate your property. In a Chapter 7 bankruptcy, this means that everything of value, including your furniture, your investments, any cash, and any other material goods, may become property of the bank or creditors. They then sell the property to attempt to collect on the payments you owe. While some items are usually exempt, you may lose many items that are valuable to you.
• Not all of your debts are forgiven. In fact, certain debts do not qualify to be discharged, and even after filing for bankruptcy, you may still owe creditors for certain debts.
• You may lose the right to receive certain income or property in the future. Creditors may lay claim to some of your future income from any job, or to the property you gain in an inheritance.
• Your credit rating will suffer. After your bankruptcy, it will take time and diligence to regain a good credit score so that you can take out future loans and credit.

Despite its disadvantages, bankruptcy is an important and beneficial way for many people with severe financial problems to get a new start.

Contact Us

To learn more about bankruptcy and how we can help you manage your debt, contact an Arizona bankruptcy lawyer from the Harmon Law Office, L.L.C. by calling 480-829-0494.