Debtors file for bankruptcy when they have excessive debt and want a fresh financial start, but whether filing is the best option for you, depends on many factors.
Is bankruptcy the best choice?
Bankruptcy filing impacts your credit report for a long time, so it’s better if you try to solve your debts without filing for bankruptcy.
Which chapter is better?
Chapter 7 liquidation is best for those who can save their assets from liquidation by exemptions and have income low enough that they qualify for chapter 7 bankruptcy filing.
In contrast, chapter 13 bankruptcy, works best for people who have a steady income and want to save their house or car from foreclosures and repossessions, or who want to pay back non-dischargeable debts.
Various factors need to be considered-
- Type of debt you owe.
- Your income and expenses
- Whether you will los4e property
Will bankruptcy wipe out your debt?
There are certain types of debts that cannot be discharged like alimony or child support called priority obligations. Debts like medical bills are easily discharged.
Is Your Lender About to Foreclose on Your Property?
In secured debts, the creditors have collateral that they can repossess if you falter in your payments, like car loans. These debts are not normally discharged in bankruptcy cases and will go on even after it ends. But the bankruptcy Automatic stay can put a pause on it. In chapter 7 bankruptcy it is usually a temporary stay but in chapter 13 bankruptcy you might be allowed to-
- Keep the collateral and catch up on your payments.
- Reduce the balance of the loan if you qualify for a cram-down.
- Eliminate wholly unsecured junior liens from your house through a process called lien stripping.
Are you facing wage garnishment or lawsuits?
If you don’t make payments of the debts, then your creditor might go to court for payments, doing this can start wage garnishment or even start lawsuits.
Filing for bankruptcy puts a stop to this and helps you figure out a way.
What happens to your assets?
What will happen to the debtor’s assets, there is a bankruptcy exemption list where all the assets that can be excused from being liquidated are stated. What will happen to your non-exempted assets will depend upon which chapter you file, chapter 7 or chapter 13.
In chapter 7 your bankruptcy trustee has the authority to sell any non-exempt assets to pay off your debts.
In chapter 13, you can keep all your assets but need to pay off the unsecured creditors the amount equal to your value of non-exempt properties.
What is exempt equity?
Debtors can exempt or protect a certain amount of property regardless of the chapter filed. The dollar amount of an ownership interest that you can protect is called “exempt equity.”
Calculating exempt equity is a two-step procedure. First, you will have to find out how much of an asset’s value you can protect. You’ll do so by consulting your state’s exemption statutes.
Some exemption statutes tell you the number of items you can protect others let you keep properties up to a value allocated.
The next step is figuring out how much equity you have in your property.
Do you qualify for bankruptcy?
Both chapter 7 and chapter 13 have eligibility requirements. Your income must be low enough to pass the chapter 7 means test and if filing for chapter 13 then you must have a steady income.
If you want a good attorney, reach the Recovery law group – (888-297-6203).