One of the scariest aspects of accumulating a large debt load is the potential actions that creditors may be able to take against you. It's common to wonder if bankruptcy may be a way to defend yourself against such actions. This article will explore how a bankruptcy attorney might address the issue.
Getting a Stay
When a petition for relief is entered by a bankruptcy attorney services provider, it is standard practice for the client's lawyer to request a court order halting all actions. This is a stay meant to prevent things like repossessions and foreclosures. Essentially, the court agrees that it would difficult, if not impossible, to restore the status quo if actions continued; therefore, everything is put on pause until the court can sort things out. This includes halting all collections efforts, especially phone calls and letters.
Take note, however, that this is not a permanent defense. The court is simply pausing things until such time that the bankruptcy petition can be fully considered.
Restructuring vs. Liquidation
Eventually, the court will want a petitioner to settle up with their creditors. Even with the best bankruptcy lawyer by your side, there is no legal sleight of hand that can prevent this outcome.
If your goal is to defend your interests, that is to say, you want to preserve your assets, restructuring your debts is the only option likely to achieve that objective. Restructuring means you will set up a plan that makes the best effort to pay off as much of the existing debt as possible.
For example, a plan might propose that creditors take a 15% haircut on what's owed in order to allow the borrower time and financial operating room to get things under control. Usually, a plan must be completed within 3 to 5 years, and the petitioner must pay every nickel offered in the plan.
Liquidation is the other option. The court orders the sale of the petitioner's assets. While someone filing for bankruptcy can keep practical and necessary items, there's no away to hold on to a vacation home or a vehicle that isn't your daily driver.
Even if you submit a restructuring plan, there will be a meeting of the creditors. The court gives creditors the chance to register objections, and you can even be put under oath and asked questions about your finances. Only once the creditors' concerns have been examined will the court consider providing longer-term protections.
Contact a local bankruptcy attorney for more information.