In an era of financial hardship, filing for bankruptcy may be the last option for people unable to resolve their outstanding debt problems. Instead of gathering interest charges and perpetually being indebted to creditors, bankruptcy allows you to dismiss most obligationsyou would have to pay otherwise.
However, there are many limitations and consequences to filing for bankruptcy. That’s why you will definitely need legal help and professional advice from an experienced bankruptcy lawyer who will tell you what to expect in court and help you start a new financial life.
Most cases of bankruptcy are not caused by reckless spending, but by financial hardship, and many are lower-income individuals who simply cannot afford to deal with unexpected major expenses such as job loss or medical bills.
In the United States Chapter 7 and Chapter 13 are the top two most popular ways to file for bankruptcy. They are both specifically oriented towards individual or consumer debts.
Please keep in mind that both options involve long-term damage to your credit reports and makes it harder for you to obtain credits or loans in the future, as bankruptcies remain listed as long as 10 years.
However, especially Chapter 7 bankruptcy may be the only real option for you if you are struggling financially and are unable to pay off what you owe to your creditors.
Chapter 7 filings accounts for 70% of non-business bankruptcy cases and sometimes it’s known as “liquidation bankruptcy”. In many cases, it involves selling your property to pay all or part of what you owe to creditors, unless there is not that much equity in your house.
Chapter 13 accounts for the other 30% of filings and allows the debtor to keep the property and pay debts over the time and is used by individuals with higher incomes, whose property is too valuable to be sold or they don’t want to part with it.
In Chapter 7 cases much of the debts are forgiven after selling the individual’s assets, while Chapter 13 filers are paying back the creditors over the time through a “repayment plan”.
While Chapter 7 bankruptcy process usually takes up to 5 months, Chapter 13 bankruptcy lasts for up to 5 years.
Before getting started you should understand what bankruptcy chapter would be the best option for you and determine if you qualify for it.
In order to qualify for a Chapter 7 bankruptcy, which is a “fresh start” to debtors, you should earn less than the state median income on a monthly basis, or pass a “means test” that examines your financial records, including income, expenses, and secured and unsecured debt.
Secured debts are mortgages and car loans, while unsecured debts include credit card bills, personal loans, medical bills or even bad checks.
When filing for Chapter 7 bankruptcy you may be able to discharge your unsecured debts and save your house, your car and equipment or property needed for work. However, most likely, you will be forced to give up your savings, investments, family heirlooms and valuable collections, if any.
In order to qualify for Chapter 13 bankruptcy, you will have to demonstrate that you will have enough income, after subtracting certain allowed expenses and required payments on secured debts, to meet your repayment obligations.
If you need help, you should get that help form a reliable source and consult a local attorney well-versed in such matters, as there are plenty of productive solutions to your financial problems and I encourage you to find them.