How do I decide if bankruptcy is necessary?
Before deciding to file for bankruptcy, you must understand what bankruptcy will and will not do for you. Bankruptcy won’t solve every problem or get rid of every debt. If it is clear that you need bankruptcy relief, the next step is to determine what type of bankruptcy to file.
TYPES OF DEBTS
Whether bankruptcy is the right choice, and if so, what type of bankruptcy to file, depends in large part on the type of debts you have. There are three main types of debts: secured, unsecured, and priority. Unsecured debts include things like medical bills and credit cards. Secured debts include car loans, mortgage loans, and some store accounts. Priority debts include most income tax obligations.
CHAPTER 7 BANKRUPTCY
A Chapter 7 bankruptcy will discharge most unsecured debts. Secured debts, such as a car loan, or home mortgage, normally must be paid in order to protect the collateral. Priority debts, such as most income tax obligations, usually cannot be discharged in a Chapter 7 bankruptcy.
So, if most of your debt is general unsecured debt like credit cards and medical bills, and the payments on your secured debts are up to date, Chapter 7 bankruptcy may be a good choice. If you owe significant tax debt or the payments on your secured debts like your car loan or home mortgage are significantly past due, Chapter 13 may be the best option.
CHAPTER 13 BANKRUPTCY
Under Chapter 13, a repayment plan is set up for a period of 36 to 60 months. To file Chapter 13 you must have regular income sufficient to pay your living expenses and still fund the plan. Your attorney will review your income and expenses, and work to formulate a plan you can afford. A typical Chapter 13 plan pays secured debts and priority debts over the term of the plan. Unsecured debts are often paid little or nothing, but you are protected while the plan is going on, and balance that remains when the plan is completed is normally discharged (wiped out).
GOOD ADVICE IS MOST IMPORTANT!
It is critical that you get good legal advice before making any decision about bankruptcy. Make sure you talk to an attorney with experience in both Chapter 7 and Chapter 13 cases. Most good bankruptcy attorneys will provide you with a free initial consultation. He or she will fully evaluate your finances and explain all of your options.
Other Frequently Asked Questions:
- Can a Chapter 7 bankruptcy save my home from foreclosure?
- Can bankruptcy help my credit score?
- Can bankruptcy help with my income tax obligation?
- Can bankruptcy protect my workers compensation settlement funds?
- Can I discharge my old tax debt in bankruptcy?
- Can I file for social security disability while I’m still working?
- Can I receive workers compensation benefits if I was injured before or after clocking out?
- Can I save my home by filing bankruptcy?
- Can my re-enlistment bonus be discharged in bankruptcy?
- Can the bankruptcy trustee in my case seize the funds in my bank account?
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- How do I decide if bankruptcy is necessary?
- How do I know if bankruptcy is the right choice for me?
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- I cosigned a debt for a friend and now he won’t pay. What can I do?
- I was fired after being hurt on the job. Can I still file for workers compensation?
- I was injured at work. Can I sue my employer?
- I was terminated from my job after a work injury. Now my condition has worsened. What are my options?
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- My car has been repossessed. Can bankruptcy help me get it back?
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- My doctor released me to light duty, but my employer is insisting I do more strenuous work. What should I do?
- My ex assumed our joint debts as part of our divorce settlement. Now he’s filed bankruptcy. What can I do?
- My house is being foreclosed – What can I do?
- My workers comp doctor has released me to light duty work. Can my employer cut off my weekly benefits?
- My workers compensation doctor says I can return to work, but I can’t do the job. What can I do?
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- What to expect: Your next appointment
- When is my bankruptcy case closed by the court? Is it possible to reopen the case?
- Where would my bankruptcy case be filed, and where would the hearings be held?
- Will paying off an old debt raise my credit score?