So you’ve heard about bankruptcy in the legal profession, but you may not understand why it’s significant. After all, being bankrupt means being in a state of lack, and no one wants to be associated with a business in such a state. Therefore, you might think that an organization shouldn’t declare itself bankrupt given the need to protect its reputation, right? Well, as you will discover after reading this article, companies sometimes benefit from filing for bankruptcy.
WHAT BANKRUPTCY IS
Bankruptcy is a process through which legal entities that cannot repay debts to creditors seek relief from some or all of their debts. In simple terms, it is a legal process that individuals follow to admit that they are not in a position to repay their debts to their creditors through a court order. In most cases, debtors ignite the process.
Although the term bankruptcy is common concerning reference to an insolvent person, it is not the only legal term that applies to such a person. For instance, there is also the term insolvency, which means financial distress not ignited by a court order.
IMPORTANCE OF FILING FOR BANKRUPTCY
One of the most obvious yet critical advantages of filing for bankruptcy is that it gives a debtor a chance for a fresh financial start. Moreover, filing for bankruptcy significantly protects the debtor’s assets legally. For instance, consumers not eligible for Chapter 7 may be discharged from paying most of the unsecured debts. This means that only the debts that creditors are entitled to collect by seizing and selling specified debtor’s assets when payments are missed will be paid. However, with a good attorney and depending on the State laws applying in your case, you might be able to keep many of your assets by filing for bankruptcy.
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In addition to this, bankruptcy protects you from collection efforts. For instance, the bankruptcy rules have it that collection efforts should stop immediately after you start filing for bankruptcy as per the terms of Chapter 7 and Chapter 13 of USA bankruptcy laws. This means that the law protects your assets as soon as you file your petition, and if any creditor tries to collect the debt before the process is completed, such a creditor might be charged with contempt of court and be ordered to pay for damages. This is legally termed as the declaration of an automatic stay that applies to all your assets.
Filling for bankruptcy is usually not anyone’s first choice in most cases. It is usually filed as a result of painful frustration. However, as you have identified, there are some very significant importance of filing bankruptcy. However, it helps to have some good attorney advice and someone to be with you throughout the bankruptcy process. We at Samuel Johnson & Associates consider ourselves the best attorneys with the right legal professional knowledge and experience to help you navigate the tiring and demanding process. Our primary focus is on ensuring that our client’s struggle is minimized as much as possible. You do not have to be alone in this.