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3 things to know about bankruptcy

On Behalf of | May 1, 2020 | Chapter 7

Between automatic stays, debt repayment plans and multiple code chapters, there is arguably a lot to know about bankruptcy. However, there is more to it than technical details.

In general, bankruptcy can be a very good solution for people who want to get out from under overwhelming debt. Here are some of the things that not many people know about the process.

  1. It is a debt repayment tool

Many people view bankruptcy as going broke or some variation. In fact, bankruptcy is a tool that allows people to negotiate with creditors in a highly formal and regulated system.

As explained on FindLaw, there are many different ways of managing and repaying debt. Bankruptcy is just one of these. Many people use multiple approaches in order to arrive at the most efficient resolution for their debt problems.

  1. It is not a crime

Declaring bankruptcy does not make you a criminal. In fact, being in debt — although it could carry a social stigma — is not usually a crime.

Not every process in the courts is necessarily adversarial. This means that, in bankruptcy, filers are not really arguing with anyone. Some creditors might have requests or arguments with specific items in a bankruptcy, but, overall, the process is more concerned with developing a way to pay people back than with settling disputes.

  1. It could prevent crime

Although there is nothing legally wrong with declaring bankruptcy in the majority of cases, there could be legal consequences to certain types of debt. As explained by the National Council of State Legislatures, both unpaid child support and unpaid taxes could result in jail time.

Overall, bankruptcy is nothing to fear. It is simply a tool designed for handling a certain type of debt situation.