Many people have the misconception that bankruptcy is only for the financially destitute or completely broke. People assume that you must be completely broke with no money at all in order to file for bankruptcy. This is a myth, and often prevents those that would qualify to file for bankruptcy from doing so. The stigma surrounding bankruptcy is slowly fading from our society, however, and it is important to understand what legal rights you have with respect to bankruptcy if you are considering beginning this legal process.
Understanding Asset Protection
If you are in danger of having your home foreclosed upon or having your car repossessed, you may feel overwhelmed and unsure of your next steps. While many people understand that Chapter 7 bankruptcy can discharge debts, and Chapter 13 bankruptcy can help debtors reorganize their debts into a reasonable payment plan, they may not realize that as soon as you file for bankruptcy, you will receive immediate relief from the danger of repossession or foreclosure. This is known as an “automatic stay” and will halt all collections, repossessions, or other legal actions against a debtor with respect to their finances.
In fact, all telephone calls, harassing letters, utility shut-offs, wage garnishments, and evictions are completely stopped during the bankruptcy process. This pocket of time can help allow a debtor to make decisions that are best for their financial future and allow some financial breathing room during a difficult time.
The Difference Between Chapter 7 and Chapter 13 Bankruptcy
The following is a brief overview of the differences between Chapter 7 and Chapter 13 bankruptcies for consumers who face overwhelming debt. A Chapter 7 bankruptcy will allow a debtor to actually discharge (dismiss, eliminate) many of their consumer debts such as credit cards and medical bills. In order to qualify for a Chapter 7 bankruptcy, you must pass a means test, which will determine if you do not have enough disposable income at the end of a month in order to pay your debts. Again, you do not have to be completely ‘broke’ in order to qualify for Chapter 7 bankruptcy or pass the means test. Consider reaching out to an experienced attorney to see if you would qualify for this type of bankruptcy.
A Chapter 13 bankruptcy does not discharge debt, but will allow a debtor to create a reorganization of debts in such a way that they have a longer time period to pay them off. Again, a debtor does not have to be ‘broke’ in order to qualify to file for Chapter 13 bankruptcy.
Contact an Experienced Bankruptcy Attorney
You do not need to be completely financially destitute in order to receive a financial fresh start through the bankruptcy process. Let the experienced bankruptcy attorneys at Lankford & Moore Law help you determine what bankruptcy is best for your unique set of circumstances.