Myths You Might Not Know About Bankruptcy

One of the frightening words for an individual or a business owner is “bankruptcy.” It carries such a negative connotation: shame, failure, and a lack of money to pay off one’s debts. Some of the bad ideas, though, can come from misleading, wrong, or incomplete information about it. Here are some myths about bankruptcy that need to end right away:

There’s only one option: the sale of assets

First of all, bankruptcy doesn’t always have to be the only solution for any person or business. The primary goal, in fact, is to make it the last option. For this reason, the person or the enterprising entity needs to exert all efforts to manage their financial responsibilities such as debt accordingly.

If there’s no other option than to file for bankruptcy, they don’t need to sell their assets immediately. To begin, they can explore different types. Chapter 11, for example, allows the business or individual to negotiate with the creditors for a repayment plan. Chapter 13, on the other hand, lets the debtor pay their liability within three to five years, depending on their regular income. There’s also Chapter 12, which is ideal for families of fisherfolk or farmers with a steady income.

The business has no recourse against a court judgment

Money, calculator and gavelA creditor can sue a debtor for the missing or late repayments, and the court can pass judgment on that. It doesn’t mean that the debtor no longer has recourse against it. A judgment defense attorney in Salt Lake City such as Law Office of Davis & Jones, P.C. can represent a debtor in the negotiation table. They can help come up with a reasonable settlement with the creditor before they can file the necessary court documents. If the business believes that the lawsuit is unfair, false, or wrong, the debtor can contest it as well.

Automatic stay is absolute

One of the reasons why businesses or individuals file for bankruptcy is to prevent creditors from harassing them to pay up. When they submit either Chapter 7 or Chapter 13, the automatic stay is in effect. In this situation, the creditors cannot force the debtor to make the repayments or pursue them in other methods. In the process, the likelihood of wage garnishment or asset loss is low.

It is not absolute, though. Creditors can request for the lifting of the automatic stay, but it happens on a case-to-case basis. It is more common among secured debt, which means there’s collateral involved. It can be a vehicle or a home. A mortgage lender, for instance, can ask for it if it believes that the house doesn’t have enough equity to repay the loan.

There are ways around it. Besides working with a bankruptcy attorney, the individual or business owner can show proof that their assets can pay off the loan. They can also try their best to update their accounts as often as possible.

Perhaps the biggest myth of all is this: there’s no hope once a person files for bankruptcy. Remember that Marvel went through the same thing in 1996. Look where it is now. Sometimes it’s the wiggle room a person or business needs to bounce back stronger than ever.

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