People, when confounded with huge amounts of debts, are often looking for ways to get out of this grim situation. Filing for bankruptcy is one of the options that they can choose. However, there are other options also available, say lawyers of Los Angeles based bankruptcy law firm https://bankruptcy.recoverylawgroup.com/, to provide you with a fresh start. Individuals can file for either Chapter 7 or Chapter 13 bankruptcy, however, each has eligibility requirements; you should have income low enough to pass the Chapter 7 means test or substantial disposable income apart from a dollar limit cap on your debts in case of a Chapter 13 bankruptcy Los Angeles. Since bankruptcy is going to affect your credit score, it is important to consider all options including working things out with creditors outside bankruptcy. For alternate options to bankruptcy, call 888-297-6023 to speak with bankruptcy lawyers.
Chapter 7 or Chapter 13?
While the former is ideal for people with low income to pass the means test and those who can protect all their property through exemptions. They will be able to get their debts discharged during bankruptcy. Contrary to this, Chapter 13 bankruptcy is for people with higher income preventing them from qualifying for Chapter 7. People who wish to save the property from repossession or foreclosure and want to repay their non-dischargeable debts over a 3 to 5-years repayment plan.
Factors to consider while choosing a chapter when filing for bankruptcy include:
- Your income and expenses;
- Types of debts owed;
- Whether you wish to keep or lose your property.
Can bankruptcy help in your financial troubles?
You might be under heavy debts and dealing with repossession or foreclosure when you file for bankruptcy, but it is important to know the extent to which bankruptcy will be able to help you. Though bankruptcy is one of the best methods to get rid of a huge amount of debts such as medical bills, credit card bills and personal loans, there are certain debts that survive bankruptcy. These include child and spousal support, tax debts, student loans, etc. It may, however, help you in spreading out the non-dischargeable debt payment over a 3-5 years’ repayment plan (Chapter 13).
In case of secured debts like car loans and mortgages, you might be facing repossession or foreclosure action by creditors. Filing for bankruptcy results in an automatic stay which puts a hold to any collection action. Additionally, in Chapter 13 you get to keep the property and catch up on missed mortgage payments; opt for a cramdown if the property’s current value is less than the balance on your loan and remove junior liens on your house through lien stripping. The automatic stay also puts a restraint on other collection actions by creditors such as wage garnishment and lawsuits against you, apart from eliminating any underlying debt
Protecting your property with the bankruptcy
Bankruptcy filers don’t lose all their possessions. Certain exemptions (state and federal) are available to protect the debtor’s property up to a certain amount. You can choose between state and federal bankruptcy exemptions (if your state offers the choice) to protect certain equity in your assets. Generally, exemption statutes let you keep various items essential for you to get a fresh start. The non-exempt property is treated differently in different bankruptcy chapters.
- Chapter 7 bankruptcy
Any non-exempt property is sold off by bankruptcy trustee to repay your creditors.
- Chapter 13 bankruptcy
You can keep the un-exempt property but need to pay an amount equivalent to that to your unsecured creditors.
People with a significant amount of non-exempt property might find bankruptcy a nonviable solution.