Important Bankruptcy Concepts

Filing for bankruptcy can be a complicated process. For this reason, it is best practice to secure experienced legal counsel if you are considering filing for bankruptcy. A skilled lawyer can help streamline the process and ensure you understand every angle of the process.

To help you understand more about how bankruptcy works, our Dallas bankruptcy lawyers have explained four important concepts, which can be found below:

1. The Ability to Pay

A debtor's ability to pay is one of the most important concepts during the bankruptcy process. Before a debtor can file for bankruptcy, it is important he/she examines his/her income. If their income is less than their state's median, they must take the means test. The means test will determine if they are able to pay their debts. If the debtor is able to pay his/her debts, he/she can choose to file Chapter 13 bankruptcy. With this type of bankruptcy, a debtor has the ability to pay off his/her debts over a three- to five-year timespan. In addition, the means test can outline any liabilities and monthly expenses, which can determine how much disposable income remains after each month.

2. The Innocent Debtor VS The Not Innocent Debtor

The innocent debtor is any person who has not accrued debt because of illegal activity or fraud but is unable to pay certain debts. This means that any debtor who made unwise financial decisions and spent money outside of his/her means is considered an innocent debtor. On the other hand, a debtor who has lied about his/her income to qualify for a loan may not be considered innocent according to a bankruptcy court. If a creditor can provide evidence that a debtor engaged in an illegal activity, such as fraud, when incurring debt, the creditor may be able to challenge the bankruptcy discharge. Additionally, this can apply to a debtor who intentionally concealed assets to evade repaying creditors or a debtor who transferred assets in order to deceive the court.

3. A Fresh Financial Start

Bankruptcy is designed to offer a fresh start for those facing serious financial issues. As a result, a bankruptcy lawyer and trustee should not allow a debtor to do anything that can jeopardize that fresh start. In some cases, a bankruptcy trustee will decline that a debtor to reaffirm a debt if he or she does not trust that the debtor can credibly meet the debt commitment. Failing to meet the obligations of reaffirmed debts after filing for bankruptcy can ruin a debtor’s chance at a renewed financial start. So then, the trustee and bankruptcy attorney are considered the most cautious persons in regards to approving reaffirmations.

4. The Automatic Stay

Bankruptcy can be seen as an opportunity that gives a debtor the power and time to address financial difficulties without the threat of losing assets. This is why the automatic stay is able to help debtors. Such a concept is designed to protect a debtor from the following:

The concept of the automatic stay remains in effect until a debtor’s bankruptcy case is closed, dismissed, discharged, or until a creditor successfully contests the automatic stay and has it removed.

We Are Ready to Safeguard Your Future

If you are facing serious financial problems, we encourage you to get in contact with our Dallas bankruptcy attorneys right away. We can stand by your side from start to finish and ensure your rights are protected. We understand how difficult life can become when you’re faced with monetary-related adversities, and that is why we are here. No matter what your case may be, we have the resources and skills it takes to recover positive solutions for you!

Call Allmand Law Firm, PLLC today for your obligation-free consultation.