When a person or business cannot pay their debts, bankruptcy may be the best option. Bankruptcy is a form of legal relief for individuals or businesses who cannot meet their financial obligations. Although filing for bankruptcy is a difficult decision, it may allow the person or business a fresh start.
However, bankruptcy should not be entered into lightly. A bankruptcy has long-lasting financial and legal consequences. And the form of bankruptcy filing is critical, depending on the person or entity and their financial situation. Those considering filing bankruptcy in Montana will need the services of a highly qualified Montana bankruptcy attorney.
Chapter 7 Bankruptcy
Chapter 7 bankruptcies are the most common forms of bankruptcy for individuals. A Chapter 7 bankruptcy results in a liquidation of all the debtor’s assets, except for those subject to certain exemptions. These non-exempt assets are sold to pay creditors.
In exchange, most of the individual’s debts will be wiped out, or “discharged,” meaning there is no more legal obligation to pay the debts. However, certain debts are considered non-dischargeable, such as child support, alimony, and recent tax debts. These non-dischargeable debts will not be affected by a Chapter 7 bankruptcy.
Businesses can also file for Chapter 7 bankruptcy. A business’s Chapter 7 does not result in a discharge of debts, but it can result in an efficient sale of assets and payment of creditors.
Chapter 11 Bankruptcy
A Chapter 11 bankruptcy filing allows a business to keep its doors open while it seeks debt relief. The business’s debts are reorganized while the company maintains routine operations. Debt payments may be restructured, and total debt may be reduced. Although Chapter 11 is primarily intended for businesses, a self-employed individual or owner of a sole proprietorship may be eligible.
Chapter 12 Bankruptcy
Chapter 12 bankruptcy, known as Family Farm Bankruptcy, is intended for agricultural debtors. A Chapter 12 can result in adjustments to principal owed, interest rates, or payment terms.
Chapter 13 Bankruptcy
A Chapter 13 bankruptcy results in a debt reorganization, as opposed to a Chapter 7 debt discharge. The Chapter 13 debtor submits a proposed repayment plan for creditors to the Bankruptcy Court. The repayment plan generally provides for a 3-to-5-year term to pay off all or part of the individual’s debts from future income. Once a final repayment plan is approved and the debtor complies with the payment terms, the debtor’s remaining dischargeable debts may be discharged.
Creditors’ Rights in Bankruptcies
A creditor still retains rights when the debtor files for bankruptcy and may be able to recover all or part of the debt owed. However, the creditor will need to take prompt action in the bankruptcy proceeding. The creditor may need to file an adversary action in Bankruptcy Court to enforce the creditor’s rights.
Contact Lee Law Office PC to Discuss Your Montana Bankruptcy Needs
The Montana bankruptcy attorneys at Lee Law Office PC provide high-quality representation for bankruptcy filings. With extensive experience in Montana bankruptcies of all forms, our lawyers will provide the counsel, guidance, and advocacy you need. To schedule a confidential consultation, call us today at 406-434-5244 or contact us online.