If you are considering filing for bankruptcy, then you may be aware that there are a few different types from which to choose. What you might not know is that, depending on your financial situation, you might not qualify for the type of bankruptcy that you are considering. The law provides restrictions on which form of bankruptcy can be filed depending on a few key factors. Additionally, even if you qualify, you should be aware of how the various forms of bankruptcy can affect your credit rating and finances for the future. Let’s take a look at two of the most common forms of bankruptcy for individuals, and how you can decide which one is right for you, if any.
Should I Be Considering Bankruptcy At All?
Filing for bankruptcy is a serious step that can have far-reaching effects. As a result, before you file, you should explore all of the alternatives to bankruptcy. Debt consolidation is almost never a good idea. It will destroy your credit, cost you a lot of money, and often results in garnished wages before the debt consolidation company is able to settle the debts. Further, it looks just as bad on your credit as a bankruptcy. However, debt consolidation may be appropriate for those who can afford to pay back all their debt at a reduced interest rate over 5 years.
How Do I Decide Between Chapter 7 Or Chapter 13?
Chapter 7 Bankruptcy
One of the more common forms of bankruptcy for individuals is Chapter 7. This form of bankruptcy works by selling off any non-exempt assets to satisfy your outstanding debts. Most chapter 7 debtors have very few if any non-exempt assets. Chapter 7 will allow you to keep certain types of property through what is known as an exemption in the bankruptcy laws. The laws in your state will determine what is exempted.
Many people who file for Chapter 7 are not required to sell any of their assets. In order to qualify for Chapter 7, your monthly income must be below a certain amount. If your income falls below that threshold, you will usually qualify for a chapter 7. A bankruptcy attorney can help make this determination and will make sure your bankruptcy schedules are drafted appropriately.
Chapter 13 Bankruptcy
If your income is too high to file for Chapter 7, then you might have to file for another common form of bankruptcy, Chapter 13, and enter into a monthly repayment plan. Chapter 13 bankruptcy requires you to have a consistent, monthly income in order to be eligible. A percentage of your debts are then paid through a repayment plan. It is rare for a debtor to pay back all their debts. A trustee will be appointed by the court to manage your bankruptcy plan and administration. They would also ensure the monthly payment proposed by your attorney is fair and reasonable to creditors. The trustee represents the creditors. Repayment plans will last for 3 to 5 years depending on income. Once you have made all of your planned payments, any remaining debt may be eliminated. Unlike Chapter 7, Chapter 13 does not require you to sell any assets, so it may be a more attractive option if you have significant property that is non-exempt in a chapter 7.
Both Chapter 7 and Chapter 13 likely will cause a negative hit to your credit rating. After filing for bankruptcy, you will probably have difficulty obtaining loans or establishing new lines of credit for two years. Fortunately, if you have to file for bankruptcy, you can rebuild your credit, and your bankruptcy filing may be removed from your credit report after a period of time. For Chapter 7, that time period is 10 years, while Chapter 13 is slightly shorter at 7 years.
CO Bankruptcy Lawyer
Without the assistance of a skilled bankruptcy attorney, you might be unaware of your ways to effectively address your financial problems. Consumer Law Pro, who is experienced at helping clients with bankruptcy and other alternatives, can help you make sense of it all. Our experienced bankruptcy lawyers will prudently review your situation and help to ensure that you are taking the right steps to resolve your situation. To consult with Consumer Law Pro, call (303) 297-7729 or contact us online.