If you are lagging behind on payment, filing for bankruptcy is the best option to help you get rid of the debt and give you a fresh start. This is a legal method to stop all the creditors from harassing you in terms of debt collection.
The Basics – bankruptcy 101
When you file for bankruptcy, the court not only puts a stop to all the debt collection but also helps eliminate some debts as per the chapter of bankruptcy you file under. The major benefits of filig for bankruptcy include –
- A stop to the foreclosure on your house
- Automatic stay which stops all debt collection actions
- Restart your utility services
- Judgment suspension – like restoring your driver’s license.
However, there are certain things that even filing for bankruptcy can not help with like-
- Only a few debts are discharged and not all. Filing for bankruptcy does not get rid of all debts. Debts like – child support, alimony, and student loan are not discharged.
- Even if you have got the discharge, the consignor is not protected under bankruptcy.
- Only those debts are discharged that you have acquired after you have file for bankruptcy, viz within 180 days of filing.
Filing for bankruptcy automatically levies an automatic stay, preventing all actions from creditors unless specified by the federal court.
Types of bankruptcy
The most common chapters under which an individual file for bankruptcy is Chapter 7 and chapter 13.
- Chapter 7 – also commonly known as the liquidated bankruptcy, this chapter helps you to get rid of your bankruptcy by selling off or liquidating your assets and properties to pay off the creditors. The eligibility for chapter 7 is that your household income must be below the median household income as set by the US Trustee. It is important to know that filing for bankruptcy will not get you rid of all or 100% debts, but it will help discharge the exempt property. Some loans like student loans, child support etc will not be discharged at all.
- Chapter 13 – to file for bankruptcy under this chapter, the basic requisite is that you must have a regular income. This chapter helps you catch up on all your arrears and pa them over a period of 3-5 years.
Exemptions under chapter 7 bankruptcy
The following is the threshold for exemption when you file for bankruptcy under chapter 7.
- You can protect $145,425 of the equity of your current living home.
- An amount of $4000 can be exempted as equity of your car.
- You can exempt $500 cash
- A value of $1700 in jewelry can be claimed as an exemption
- You can get $2550 exempted for business tools or tools of the trade.
- $13400 can be exempted as household goods. However, each item must not be more than $625
- $1325 can be used for exemption of miscellaneous items
- For bodily injury, you can get an exemption of $25175
- All medical equipment as prescribed by the doctors with a proper prescription will be exempted.
- An amount of $5000 can be protected as insurance.
- An allowance that you receive as alimony and child support will be exempted in full.
The value of the above amount is calculated as double of you are filing for joint bankruptcy woith your spouse.
To avoid any kinds of confusion of errors in understanding the intricacies of bankruptcy, it is best to take the advice of a professional. Log in to – https://www.recoverylawgroup.com/bankruptcy/ to book an appointment.