Bankruptcy - What Are the Benefits of Declaring Bankruptcy?

There are many reasons to file for bankruptcy. One of them is to protect your Social Security benefits. The other is to get a fresh start. Basically, a lot of times people file for bankruptcy because they are just not able to keep up with their finances. 

Chapter 7 

Chapter 7 bankruptcy is a process that helps you get a fresh financial start. It allows you to discharge your debts without affecting other people's assets. However, the process can be quite difficult and can take longer if you owe money on student loans or if you have to sell a property. 

You'll need to be prepared to have a credit counseling session at least six months before filing. A court trustee will help you liquidate your assets and answer any questions you may have from creditors. 

In addition, the Bankruptcy Code includes a means test. This means the test is a screening mechanism that measures your income and expenses. The test presumptively assumes that you are abusing the system when your income exceeds the median income for your state. 

Chapter 13 

A Chapter 13 bankruptcy is an effective way to restructure debts. It can also make paying past-due bills more affordable. 

When you file for a bankruptcy, you must come up with a repayment plan that will be approved by the bankruptcy judge. This plan lays out how much you will pay back to your creditors over three to five years. You will also have to make sure that you have sufficient income to keep up with the payments. 

Before filing for bankruptcy, you should look into a nonprofit credit counseling agency that can provide you with free advice. They can also help you put together a payment plan. 

In Chapter 13, the debtor may retain some assets. However, not all types of assets are protected. 

Automatic stay 

The automatic stay, also referred to as the statutory stay, is a legal procedure designed to protect debtors from certain creditors. This means that a creditor cannot file a lawsuit or foreclose on a debtor's property while the bankruptcy case is open. 

This is a helpful tool for a harassed debtor, but the benefits can be limited. Typically, the length of the automatic stay will depend on the number of filings made in a year. 

There are some exceptions. For example, the court may grant relief from an

automatic stay for a few months, as long as the property in question is not necessary for an effective reorganization. 

Likewise, a creditor can request relief from the stay for a variety of reasons. These include re-enforcing a lien, collecting payments from a debtor, or preserving the value of an asset. 

Liquidation 

Liquidation is a process in which assets are sold off in order to pay off creditors. Depending on the nature of the business, the debtor may choose to liquidate its own property or have a third party do so on his or her behalf. In either case, a court appointed trustee takes charge of the business's assets and distributes the proceeds to creditors. 

The main objective of the insolvency law is to ensure that debtors receive a fair shake. This can be done by providing adequate notice to all interested parties. There are two major groups of creditors - secured and unsecured. Secured creditors are generally the major beneficiaries of outright liquidation. However, unsecured creditors also benefit. 

There are a number of insolvency laws in effect around the world. These differ in some important respects. 

Protecting Social Security Income from creditors 

A person with Social Security benefits can file for bankruptcy and protect their income from creditors. However, there are exceptions to this rule. 

If a creditor gets a judgment against you, they can garnish your Social Security payments. It's important to know what types of debt can be taken from your money. This can include past-due child support, delinquent alimony, and unpaid federal taxes. 

The Social Security Administration can withhold benefits if you have a court judgment for unpaid child support or alimony. In addition, the Department of Treasury can withhold Social Security payments if you have past-due federal tax bills. 

Another exception to the rule is when you transfer benefits from one account to another. Banks have to protect your funds when you deposit them directly into a benefit account. But if you move the money to a creditor's account, you'll have to make more effort to get it back.

You may consider looking into hiring a Harrisburg bankruptcy attorney before you start the bankruptcy process. This will ensure that you have the right legal representation or knowledge to go about your case or what you are trying to accomplish.

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