By Ryan C. Wood
What does bankruptcy mean is probably different to different people. It is possible to be bankrupt and not have filed for bankruptcy protection? Yes. Is bankruptcy the process of discharging debts or reorganizing debts? Yes. Can one be morally bankrupt and financially bankrupt? Yes and yes. So what does bankruptcy mean? The most common explanation is a business or a person has debts that are greater than their assets. Or a business or person cannot pay their bills as they come due each month. Insolvent is a another term that is used to describe being bankrupt. The most common use is to describe someone that has actually filed a petition for bankruptcy under Chapter 7, 9, 11, 12 or 13 of Title 11 to discharge or reorganize their debts. What does bankruptcy mean can best be answered by describing the process of filing for bankruptcy protection.
The first part of the process is finding the right bankruptcy attorney to help you. Do not use a bankruptcy petition preparer. Petition preparers cannot give you any legal advice and you cannot easily voluntarily dismiss a Chapter 7 case once everything goes bad after the case is filed. Once the Chapter 7 petition is filed you will most likely be stuck, so it is very important that all issues are discussed and you know what to expect before the petition is filed. You will pay more, but the extra expense of hiring an experienced attorney is priceless in the long run. Once you have retained counsel you will need to pay the fees and costs in full and then provide the necessary documents to draft and file an accurate and complete petition for bankruptcy protection.
Once of the most common questions other than what does bankruptcy mean is what are bankruptcy exemptions. Bankruptcy exemptions protect your assets when filing for bankruptcy protection. There are federal exemptions and states can opt out of the federal bankruptcy exemptions and create their own. Why are bankruptcy exemptions necessary? As soon as a petition for bankruptcy is filed a bankruptcy estate is created. Pursuant to section 541 of the Bankruptcy Code, property of the estate, includes basically all of your assets at the time the case is filed. There are exemptions for equity in homes, to protect vehicles, household goods, retirement account funds, clothing, jewelry and tools of trade. What does bankruptcy mean does not mean leaving someone with nothing after filing for bankruptcy. You will still have what you need to live life and recover. California in particular has generous bankruptcy exemptions.
What does bankruptcy mean also includes life after bankruptcy. For the most part your life will not change that much other than not having to struggle to pay your debts each month and being able pay your bills like rent and food easily each month. Bankruptcy means obtaining a fresh start at is core. It is not a head start or a jump start, but a fresh start financially. It will take time to rebuild your credit score, but your credit score was probably not so great before filing for bankruptcy protection anyway. The damage is usually done far before actually filing for bankruptcy. What does bankruptcy mean does not mean destroying your credit score. It means giving you the ability to make payment each month on your cell phone bill, rent and utilities so that you can rebuild your credit score.
Retaining the right bankruptcy attorney and actually filing for bankruptcy protection is never easy. What is right for you can only be determined by you. There are never easy answers to many questions. What does bankruptcy mean is many things and most importantly obtaining a fresh start and doing better financially.