If you are debating whether to file for bankruptcy, you may feel overwhelmed regarding your choices, the process, and what your options actually are. You may wonder if all of your debts are automatically eliminated, or what your credit will look like following a bankruptcy. This bankruptcy overview will provide you some bankruptcy basics to help you start making the decision of whether bankruptcy is right for you.
Types of Bankruptcy
There are two types of bankruptcy available to consumers in the United States: Chapter 7 and Chapter 13 bankruptcy. Understanding the differences can help you make a determination regarding which one may be right for you.
- Chapter 7. Chapter 7 bankruptcy is a common type of bankruptcy for individuals, as this type of bankruptcy will discharge (eliminate) many of a debtor’s obligations. While this appears attractive to many who are considering bankruptcy, it is important to note that in order to qualify for Chapter 7 bankruptcy, a debtor must pass a “means test,” which is a calculation that determines the amount of disposable income a debtor has at the end of every month. If the calculation determines that a debtor has too little income at the end of every month, they will qualify to file for Chapter 7 bankruptcy. Additionally, any person may refile for a Chapter 7 bankruptcy every six to eight years.
- Chapter 13. Chapter 13 bankruptcy is different from Chapter 7 bankruptcy. Chapter 13 bankruptcy does not discharge your debts, but rather allows you the opportunity to reorganize them in such a way that you pay them off over a longer period of time. There is no “means test” that a debtor must pass in order to file for Chapter 13 bankruptcy, as most of the debts will remain. However, Chapter 13 bankruptcy will also allow a debtor to keep most of their assets as they do not need to liquidate or sell them in order to pay off debtors.
The Bankruptcy Process
After you decide to file for Chapter 7 or Chapter 13 bankruptcy, you will need to file the proper paperwork with the court. A bankruptcy trustee will be assigned to you, and they will make determinations regarding what additional documents are needed. In some cases, you will have a 341 Meeting of the Creditors to allow creditors to have a say regarding your bankruptcy. Finally, after all paperwork and meetings are held, the court will decide either what to sell and what debts will be discharged in your Chapter 7 bankruptcy, or a reorganization plan for your Chapter 13 bankruptcy. Your credit score will be affected for approximately seven years following your bankruptcy.
Contact an Experienced Bankruptcy Attorney Today
If you are considering filing for bankruptcy, you may feel confused and overwhelmed at your options and the process you need to go through. Contact the experienced bankruptcy attorneys at Lankford & Moore Law today to schedule a consultation and give you the answers you need to help you through the bankruptcy process.