What Is Bankruptcy in Jefferson County?
In the days of old, a debtor faced debtor’s prison if he was unable to pay his debts. Thankfully, those days are no more. Instead, we take a more practical, and humane, approach to situations where a debtor cannot pay debts. In Kentucky, as well as other states, a debtor may file for protection from creditors by filing a petition for bankruptcy. If you are struggling to pay your bills and are falling further and further into debt, bankruptcy may be your solution.
The purpose of bankruptcy is to alleviate burdensome debt from a debtor who has amassed that debt honestly, or without the intention to defraud creditors. The Bankruptcy Code is divided into chapters. Some chapters deal with administrative matters and other bankruptcy related laws while some chapters address specific types of bankruptcy proceedings available to debtors. This is why we refer to bankruptcy as a “Chapter 7” or “Chapter 13”.
In Jefferson County, Kentucky, as well as other states, both individuals and corporations may file for bankruptcy. Only one chapter – Chapter 7 – allows a debtor to discharge the majority of the debtor’s debt without repayment. Prior to the Bankruptcy Reform Act of 2005, the ability to file using Chapter 7 was sometimes abused. Chapter 7 is intended to be used by a debtor who does not have the means to repay the debt. All other debtors are expected to make a good faith effort to repay debt by creating a repayment plan that provides additional time (usually three to five years) to repay debts. To prevent Chapter 7 abuse the “means test” was implemented in 2005 which now requires a debtor to qualify in order to file a Chapter 7.
Regardless of the chapter used, the purpose of bankruptcy is to help a debtor in financial trouble. Filing bankruptcy in Jefferson County can help by halting all collection efforts for a short period of time which can prevent repossession or foreclosure. In the long run, bankruptcy helps a debtor by eliminating debt and/or by allowing the debtor the time needed to recover from a temporary financial set back.