Understanding Bankruptcy Law: How to Navigate the Legal Process

Understanding Bankruptcy Law: How to Navigate the Legal Process 1

The Basics of Bankruptcy Law

Bankruptcy law is a legal process designed to help individuals and businesses who are facing financial difficulties. There are different types of bankruptcy, but the most common are Chapter 7 and Chapter 13. Chapter 7 bankruptcy is often referred to as a “liquidation” because it involves the sale of the debtor’s non-exempt assets to pay off creditors. Chapter 13 bankruptcy is often referred to as a “reorganization” because it allows the debtor to keep their assets while they create a plan to repay creditors over a period of time.

Understanding Bankruptcy Law: How to Navigate the Legal Process 2

Eligibility Requirements for Bankruptcy

In order to file for bankruptcy, individuals and businesses must meet certain eligibility requirements. To file for Chapter 7 bankruptcy, a debtor must pass a “means test,” which compares their income to the median income in their state. If the debtor’s income is below the median, they may qualify for Chapter 7. If not, they may be required to file for Chapter 13. To file for Chapter 13 bankruptcy, the debtor must have a steady income and their unsecured debts (such as credit card debt) must be below a certain amount.

The Automatic Stay

One of the benefits of filing for bankruptcy is the “automatic stay” which goes into effect as soon as the bankruptcy petition is filed. The automatic stay prevents creditors from taking any action to collect on debts, including collection calls, lawsuits, foreclosures, and wage garnishments. The automatic stay can give debtors much-needed breathing room as they work through the bankruptcy process.

The Bankruptcy Process

The bankruptcy process can be complex and time-consuming, but it typically involves the following steps:

  • Filing a bankruptcy petition with the court
  • Completing credit counseling and debtor education courses
  • Attending a meeting of creditors, where the debtor will answer questions under oath
  • Creating a repayment plan (for Chapter 13 bankruptcy only)
  • Completing the bankruptcy process, which may include the liquidation of assets and the discharge of debt
  • Working with a Bankruptcy Attorney

    While it is possible to navigate the bankruptcy process without an attorney, it is highly recommended that debtors work with an experienced bankruptcy lawyer. An attorney can provide valuable guidance on eligibility requirements, the different types of bankruptcy, and the bankruptcy process. They can also represent debtors in court and negotiate with creditors on their behalf. Hiring a bankruptcy attorney may be an added expense, but it can save debtors time, money, and stress in the long run.


    Bankruptcy law can be a useful tool for individuals and businesses facing financial difficulties. Understanding the basics of bankruptcy, including eligibility requirements, the automatic stay, the bankruptcy process, and the benefits of working with a bankruptcy attorney, can help debtors navigate the legal process with less stress and greater confidence. Should you desire to discover more about the subject, TransUnion dispute, to supplement your reading. Find valuable information and new perspectives!

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