Hi, I am probably going to be filing for bankruptcy due to some old apartment bills that I can’t pay for and I have a lawsuit against me because of it and I have no money to my name at the moment due to being sick for quite sometime so, I’ll have to file for bankruptcy, what happens in regards to that? I’ve been reading a bit and wanted to know what happens if you don’t have any assets to sell, because I really don’t have anything at all.
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There are different kinds of bankruptcy. Broadly speaking though the idea of bankruptcy is that when someone cannot pay all their bills in full and on time they fall back on the court to take control of the situation and mandate a resolution. This doesn’t mean that a person or organization has no money, and it doesn’t mean that they don’t need to pay back their debts. It just means that often some debtors will need to accept delayed repayment or some debts won’t be paid back in full.
For an individual bankruptcy might turn out to be something like garnishing of wages for a period of time, while they are allowed to keep things like their car and house (if they own one). The reasoning behind this is that someone needs certain things to continue to earn and live, and stripping someone to the point they are destitute isn’t good for society overall. How your particular legal issues will turn out is not something this subreddit can address though.
For chapter 7 (probably what you will file if you have no income): Basically you will file a petition in federal court listing your assets, debts, and showing that you do not have sufficient income to pay those debts. A trustee will look at your petition (and any necessary documentation) and see if you have assets that 1) are not protected and 2) which could be sold to pay your creditors. You probably don’t, so then if no creditors object (they probably won’t) a judge will enter an order discharging your unsecured debts (i.e. you don’t have to pay them.) You’ll go back to paying your secured debts, if any (car, mortgage.)
If you are currently behind on your car or house payment, and wish to keep them, you will probably need to file a chapter 13, which is a longer and more complicated process of reorganization of your debts, in which the court oversees your payments to these creditors.
In any bankruptcy you will be broadly protected by the automatic stay provisions of the bankruptcy code: that is, most creditors will be unable to try to collect on a debt without permission from the court.
That’s in a nutshell. Each state has different specific rules and requirements, and allows different kinds/amounts of assets to be protected, and needless to say an attorney should advise you of your best course.
It can really change from place to place, country to country or even state to state.
In the fairly recent past we used to put people in prison when they could not pay their debits. This came to be seen as barbaric and the government devised a process where a person can get out of debt that they cannot pay, but also not be able to just walk away from debt easly.
As a general rule, bankruptcies is a legal process (as in, a process within the legal system) where you formally state that you cannot repay your debts. You then normally go through a formal process where they determine what assets you may have (things they can take and sell) and what debts you have (things that you cannot repay). You then normally need to pay some nominal amount based on your income. Sometimes certain assets can be protected, or excluded from a bankruptcy but not always.
After the process is finished it will be incredibly hard to borrow money, BUT you won’t have to go to debtors prison so that’s a big benefit.
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