Our changing world and the unstable US economy have created significant uncertainty for many people. In navigating these challenges, many consider bankruptcy an option, though it can be daunting. The prevalence of misinformation around bankruptcy can leave those considering it overwhelmed and confused.
How do you know what you can keep or not? What type of bankruptcy should you file? Is it the right choice for your situation at all? Below, we seek to provide answers to questions like these.
Understanding Chapter 7 and Chapter 13 Bankruptcy
The most important thing about bankruptcy is that it isn’t the right choice for everyone facing financial difficulty. To build on this, even for those for whom bankruptcy is a good fit, it’s important to know what kind of bankruptcy to pursue. For the average person, their choice will be between a Chapter 7 and Chapter 13 option.
● Chapter 7 Bankruptcy: This bankruptcy type is often a good choice for those with limited income who cannot repay their debts. Known as a “liquidation bankruptcy,” the process involves working with a court-appointed trustee who will help evaluate your assets. They’ll determine which property is non-exempt and will take steps to sell it and distribute the proceeds among your creditors. This process is often quicker and easier than Chapter 13, with the trade-off being a potential loss of assets.
● Chapter 13 Bankruptcy: An option for those who earn a regular income and want to try to pay off their debts over three to five years. This approach allows those filing to keep their assets, provided they cooperate with the repayment plan given by the courts. It’s a good option for those who fall behind on car payments or mortgages but want to try to retain their property.
Filing either form of bankruptcy provides an important legal shield. This shield is known as the automatic stay, which immediately stops collection activities, including wage garnishments, phone calls, foreclosure proceedings, and others.
Determining the Right Bankruptcy Option For You
Determining which type of bankruptcy you should file starts by determining your goals, financial circumstances, and available assets. The following list includes important things you should consider when making your decision.
● Income Level: If you have minimal disposable income and a below-average income for your state, Chapter 7 is often a good choice. On the other hand, if you have a steady income, Chapter 13 may help you get back on track.
● Asset Protection: If you’re trying to protect your assets, then Chapter 13 should be your first consideration. Secured debts, such as a car payment or mortgage, can be restructured through a court-ordered payment plan to help you retain your home. If the goal is simply to discharge your debts with or without retaining your assets, then Chapter 7 may be a good fit.
● Long-Term Impact: One of the most important considerations for some is how long the bankruptcy remains on your credit report. Chapter 7 bankruptcy will be included in your credit report for ten years, while Chapter 13 is cleared after only seven.
Those considering a bankruptcy proceeding are strongly encouraged to engage a bankruptcy professional. They’ll help you navigate the process and ensure you can achieve your goals. Whether those are clearing your outstanding debts or protecting your assets while you get back on track, they’ll lead the way.
Take the Next Step Toward Financial Stability
Bankruptcy is a powerful tool for those who have run into financial difficulties and are looking for answers. The bankruptcy attorneys at Hines Law are dedicated to helping people like you navigate the confusing world of bankruptcy without fear.
With several locations throughout the Boston area our bankruptcy law firms are easily accessible and ready to provide guidance, support and sound representation for your debt solution. Reach out to our offices today for a Free Consultation.