If your finances are in danger, do not panic. Before you go off in search of a bankruptcy attorney, there are a few things you should come to understand about this particular problem. While the following information is in no way meant to stand in for legal advice, it is a good idea to get a general idea of the basics before seriously considering the assistance of a bankruptcy attorney.

Bankruptcy is a federal court proceeding – one which seeks to liquidate a debtor’s assets and relieve the debtor of further liability. There are two types of proceedings, Chapter 7 deals with liquefying assets and Chapter 13 deals with debt reorganization.

With Chapter 13, a debtor may see their debt consolidated into a single monthly payment which can continue over a period between 36 and 60 months. A payment plan would not extend longer than five years, and debtors pay as much as they can afford to pay. Monthly payments are likely to reflect all of the assets a debtor plans to keep, and any debt leftover after the last payment is made is voided.

Chapter 7 is the slightly more appealing option, but recent changes to the laws have made filing for it more difficult. After filing, a court-appointed trustee will liquidate some of a debtor’s assets in order to pay creditors. After these items are sold, debt is cancelled. It is important to note that the debtor is generally allowed to keep a car or home in which a creditor has a lien.

Before filing, seriously consider the disadvantages of being officially labeled bankrupt. First, being declared bankrupt may affect your future, as it will appear on your credit score for 7-10 years after the fact. This means that you may not be able to obtain a mortgage loan or a car loan for quite a while. Secondly, not all of the debt accumulated will disappear. Child support, alimony, relevant student loans, divorce settlements and some income taxes fall into this category.

On the other hand, there are advantages to filing, especially if bankruptcy offers the only shining light at the end of the tunnel. Besides a fresh financial start, Chapter 7 allows debtors to be forgiven most unsecured debts (secured debts are usually met by selling a debtor’s assets). A debtor may be entitled to keep many of their assets, depending on what is dictated by state law. Debtors cannot be fired from their jobs due to bankruptcy status, and attempts to make collections must stop when a debtor files for either Chapter 7 or 13.

Keep in mind that filing for bankruptcy does not necessarily guarantee the complete forgiveness of all debt. Filing may not be the best option for everyone, and it is essential that debtors obtain advice from an attorney if they are hoping to hang on to a car or home after declaring bankruptcy. Anyone wishing to file for Chapter 7 is required to seek credit counseling which ultimately may not be such a bad idea, even for a debtor who does not end up filing.

Author Bio: Ellie Lewis recently spent time researching bankruptcy with the help of a bankruptcy Dallas specialist. She searched the term Frisco bankruptcy attorney to find a law practice in the area.

Category: Finances
Keywords: Bankruptcy Dallas,Frisco bankruptcy attorney