Bankruptcy is an extreme solution to debtors’ problems with creditors. Bankruptcy is actually a legal procedure through which individuals or other entities that cannot pay debts to lenders can seek legal relief from all or some of their debts by declaring themselves bankrupt. In most states, bankruptcy is often imposed by an appropriate court order, usually initiated by the plaintiff or defendant.
The primary goal of bankruptcy law is to protect creditors against creditors, which are often given to them without due consideration. Most people believe that bankruptcy is simply about declaring oneself bankrupt but this is not true. For example, a debtor who files for bankruptcy does not actually declare himself as bankrupt. Bankruptcy only happens when a debtor no longer has sufficient funds to pay back his debts and/or when the debtor is unable to obtain any loan from any financial institution, including banks and credit unions.
When a debtor files for bankruptcy, he or she will be advised to go for a debt settlement with the creditor. A debt settlement is a formal agreement in which the debtor agrees to pay the full amount owed rather than an amount lower than the original loan. A debtor is able to obtain a debt reduction, sometimes up to 60%, when filing for bankruptcy. This means that the debtor will be able to pay back only a part of the debt instead of paying all the way up to the full amount owed.
Debt settlement is a great option for people whose credit ratings have been damaged because of the failure of previous loans or mortgages. If you have not been able to repay your loans for the past few months and if you are not able to find alternative sources of income because of the recent economic crisis, going for a debt settlement may be your best option. Once you file for bankruptcy, the creditors will not be able to contact you anymore. Therefore, there will be no need to pay additional interest on the amount you owe, even if you do not pay back the entire amount.
The process of debt settlement, however, may not be easy. You may have to hire an attorney who will negotiate with the creditors on your behalf and make sure that you get the best possible deal for you. Even though the process is very important, you should not forget that you should also look for a good attorney to represent you in a bankruptcy court case.
Before choosing a bankruptcy lawyer, you should ask your friends and family for recommendations about a firm that they would recommend to you. You can also use the Internet to find the right bankruptcy attorney who will handle your case in a professional and ethical manner. When you select a firm, make sure that your attorney is an expert on the subject and is familiar with the bankruptcy law.