What Is Bankruptcy?
When a person is no longer capable of meeting their obligations to creditors and lenders, they are allowed to relive some or all of their debts.
There are two types of personal bankruptcy that are typically used to help people who are in debt and who do not see a way out of the problem.
- Chapter 7 bankruptcy, it means that the debtors are able to discharge all or a part of their debt.
- Chapter 13 bankruptcy, the debtors will repay all or a portion of their debt based on a payment plan.
When you are considering filing for bankruptcy, it is important to remember that there are some debts that cannot be removed. These include federal and state taxes, student loans, and spousal and child support.
It can take care of most other types of debt though, and it could be a great option for you. You will no longer have to worry about being called and pursued by creditors, and you can start over with your life. For many, it is the perfect way to find a new lease on life. However, you will need to think about which of these options is going to be the right choice for you.
Still, if there are other options available for you to get out of debt that avoid going through bankruptcy, they are still going to be a better option. When you file for a bankruptcy, it is going to stay on your record for about a decade, and this is going to affect your credit and your ability to get loans for real estate, vehicle loans, and more. Always think carefully and make sure it is your last choice before you file.
This is the most common type of bankruptcy filed in the United States today. If you want to file a Chapter 7 bankruptcy, you will need to meet certain criteria first. You need to pass a test that proves that your income is less than the median income for a family of your size in your state. If you make more than this amount, it means you will have to file a Chapter 13 bankruptcy instead.
In addition to passing this test, you will also have to receive credit counseling from a credit counseling agency that has been approved through the U.S. Trustee Program’s website.
When you file Chapter 7, you will find that you are able to keep some types of property that are exempt. This will include most of the real estate mortgages, as well as car loans that you might have. If you have other assets, they are going to be liquidated and the money is going to go toward paying back the creditors.
The debt is not going to be erased or discharged with a Chapter 13 bankruptcy as it would be with a Chapter 7. This is an option for those who are making more than the median amount of money for a family of their size in their state, but who are unable to pay their bills temporarily for some reason or another.
With this type of bankruptcy, the court will reorganize the debt. Some of it might be discharged, but not all of it. The court will come up with a plan that will reorganize the debt to be paid back over the course of three to five years in most cases. At the end of the period, remaining debt is likely to be discharged. One of the reasons that some people choose this option when filing is so they can keep more of their property, which could potentially be lost when they are filing a Chapter 7 bankruptcy.
You might have seen or heard about products that you can use to file for bankruptcy on your own. However, this is one of the biggest mistakes you could make. There are certain requirements that need to be followed, and paperwork that needs to be filed. The best – and really only – course of action is to get in touch with a bankruptcy attorney who has plenty of experience in the field and who can help walk you through each step of your case.
The attorney that you choose should be able to answer all of your questions, and they should be able to take care of your creditors, so you no longer have to deal with them on the phone. Great bankruptcy lawyers will help you determine what type of bankruptcy is right for you, as well. Ultimately, they should provide you with a clear path that you are going to follow through the bankruptcy process that will help you to get clear from debt so you can start over.