When you are behind on your bills and unable to repay your debts, you may be a candidate for bankruptcy. Overwhelming debt can lock you into a downward spiral, both financially and emotionally. Most people think of bankruptcy as a last resort,
but it can actually be the fresh start that you need to get back on the right financial path. It is helpful to know about the types of bankruptcy so you understand your options. An experienced bankruptcy attorney will help you with the entire process.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is also sometimes called liquidation. This type of personal bankruptcy requires you to liquidate your assets and use the proceeds to repay debts. Liquid assets are those that are easy to convert to cash. Some of your assets are protected and considered exempt from liquidation. Once you repay what you can from the proceeds of liquidation, your remaining debt is discharged. You will no longer be liable for these past debts. As soon as you file bankruptcy, creditors can no longer attempt to collect debts and you will not receive harassing phone calls and threatening letters.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy is often the better option if you have regular income. This option allows you to consolidate your debts and agree to a payment plan. You will have monthly payments that you can afford, so you can repay the debts that you have already incurred. Chapter 13 allows you to keep your car, for example, and continue to repay the loan. To file Chapter 13 you cannot have more than 923K in secured debt and 308K in unsecured debt. Both types of bankruptcy require that you get approved credit counseling.
Is Bankruptcy the Right Choice?
There are some debts that bankruptcy won’t eliminate. These include such things as alimony payments, taxes, child support, student loans, and court-ordered payments. If you have a concern about these types of debts, bankruptcy may not be the
answer. Sometimes you may find an alternative to bankruptcy. For instance, you may be able to work out a repayment plan with creditors without bankruptcy. Creditors are typically interested in getting repayment, and they may not get adequate repayment if you file bankruptcy. Therefore, they may be willing to negotiate a reduced or partial payment plan.
Bankruptcy may be the best solution if you are continually behind or making late payments, if you have a limited income, if you have started to receive calls from creditors, if you are at risk of losing your home, or if your debts total more than half your income. The decision to file bankruptcy is a big one and one that will have a lasting impact on your future finances. It is best to talk to a qualified attorney to discuss the options that are available in your situation. You need to fully understand the pros and cons of filing bankruptcy before you make this difficult decision.
To learn more about bankruptcy and to get legal assistance, contact Moen Sheehan Meyer, Ltd. today. Mention this article and receive a free initial consultation.