Understanding Bankruptcy & Law

When you have run out of funds to pay creditors, the money owed and promised to them; a last resort is bankruptcy. St Louis business owners and individuals with mortgages to pay will try everything else: loan consolidation, personal loans from friends and family, selling off assets, and exchanging a big house for a smaller one. Some debts in St Louis, however, are too enormous to pay in a reasonable amount of time. Lenders are calling every day. Creditors are even knocking at the door. No one is asking politely anymore. The harassment has become too much. One option remains: file for bankruptcy.

What is Bankruptcy?

This is a declaration of financial insolvency. When you declare bankruptcy, you are publicly stating that you are unable to meet your financial obligations. By documenting this claim, you force creditors to stop pursuing you. Under the law, they cannot ask for money any longer, and the law protects bankrupted individuals from harassment. This has to be an official step, however. Some people who apply for bankruptcy do not qualify, and this is where you would want a St Louis bankruptcy lawyer.

Qualifying for Bankruptcy

One has to apply for bankruptcy and take a means test to determine if his income is, in fact, sufficient to repay some or all of the money he owes. Many people try to defraud the system by saying they make inadequate money to honor their debts when, in fact, they could pinch pennies in other areas and satisfy lenders without losing their homes. The things they do not wish to give up are considered “wants” rather than “needs.”

When a person’s means test proves he is financially incapable of repaying lenders, he can proceed to the next step: officially and publicly declaring he is insolvent.

Two Types of Bankruptcy

The two types of insolvency are known in the United States as Chapter 7 and Chapter 13. Chapter 7 bankruptcy is the type most people think of because it is a state of true insolvency. One is completely bereft of the means to pay back their loans or honor debts. Chapter 13 bankruptcy implies that a person is earning some money; enough to repay some of their loans, maybe all of them, but only if they are given more time by creditors. A time allotment is given so the matter can be wrapped up rather than dragging on.

When a person claims insolvency, this is a bad day for everyone. Creditors can now say goodbye to any repayment that might have been coming in the future. The bankrupted individual is unable to take out a major loan for several years, and he needs to build up his credit rating once more. It is better, wherever possible, for creditors and lenders to agree to other programs that result in repayment at a lower interest rate, for instance, rather than a total loss of income from a debtor.

If you have to claim bankruptcy because of some type of personal injury case, it’s important that you contact a personal injury lawyer in St Louis, as they may be able to help you beyond bankruptcy.

How Can a Bankruptcy Lawyer Help?

In Canada, one does not need legal counsel to claim bankruptcy, but in the United States counsel is required. If you are in this situation, your lawyer will gather documentation, help you decide which type of bankruptcy to file for, and will also help you protect some assets. He might try other methods to prevent you from filing, interceding with lenders to work out a deal that is better for everyone. Certain assets are exempt, and others are not, but with legal support you will probably walk away with more of your belongings intact than if you had tried to represent yourself.

But bankruptcy lawyers are also there to protect the other side. What if you are a business owner or private lender seeking compensation from someone who wants to get out of her agreement when you know she still has two holiday homes and is bound for a summer break in Tahiti in spite of telling you she is broke? Perhaps you are the victim of valuation fraud or some other type of criminal behavior committed by a person filing for insolvency. Attorneys in bankruptcy cases can accuse someone who files for bankruptcy of trying to defraud lenders. Insolvency does not protect a person if she has committed a crime.

Where Do Bankruptcy Lawyers Work?

Bankruptcy law is a tiny niche in the bigger legal field. Few individuals specialize in this area. Several operate in the non-profit arena. In recent years, some attorneys found they took on more of these cases than usual, but a practice where bankruptcy clients are represented will also handle associated types of law. These are usually of a civil (non-criminal) nature. Examples could be tax, business, or real estate law, all of which involve overlapping elements. Just make sure as a St Louis resident that you get the proper help you need whether it’s personal injury, bankruptcy, or something else.

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