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What You Need To Know About Bankruptcy – Bankruptcy is an option if you have too much debt. Find out if bankruptcy protection is right for you, the differences between types of bankruptcy, when to file and what to expect.
This article is for informational purposes only. This content does not constitute legal advice, is the author’s statements and has not been evaluated by us for accuracy or changes in the law.
What You Need To Know About Bankruptcy
Distinguishing between different types of bankruptcy and knowing when to file can be confusing.
Chapter 7 V. Chapter 13 Bankruptcy: Which One Is For Me?
In this guide, we’ll cover Chapters 7 and 13 – the two most common types of bankruptcy – and explain what happens after you file bankruptcy, how to do it, and the questions you should ask yourself to determine if bankruptcy is the right solution for you.
Bankruptcy is a legal process for individuals or businesses that are unable to pay outstanding debts. You can go bankrupt in one of two main ways. A more common route is to voluntarily declare bankruptcy. The second way is for creditors to ask the court to declare bankruptcy.
If you decide to file for bankruptcy yourself, there are several ways you can do it. Before taking any further action, you may wish to consult with an attorney to determine the solution best suited to your situation.
There are other types of bankruptcy filings that are less common and more costly for small businesses, such as Chapter 11. This type of bankruptcy is for businesses with $2.5 million or more in debt or businesses that are owned by LLCs or partnerships. Chapter 11 bankruptcy is similar to Chapter 13 bankruptcy, but usually only applies to businesses.
Know About Who Files Bankruptcy In The United States
The Small Business Reorganization Act of 2019 made Chapter 11 less costly for small businesses by giving them more flexibility to negotiate bankruptcy terms with creditors. However, it is still much less common than Chapter 13. You can talk to a lawyer if you think Chapter 11 bankruptcy is right for your business.
Filing for bankruptcy automatically stops creditors’ claims against you. This means that your creditors must stop trying to recover the money they are owed. They will not be able to:
Your case will be assigned to a bankruptcy trustee, who is a lawyer who will oversee your case. The trustee will send notices to creditors and schedule a hearing.
From there, the procedure depends on whether you filed for protection under Chapter 7 or Chapter 13 of the federal bankruptcy code.
The Role Of The Bankruptcy Trustee In Chapter 7
Chapter 7 is one of the most common types of bankruptcy. In a Chapter 7 bankruptcy, you will:
There are certain assets – such as a limited amount of cash, clothing, household goods and a car – that you can keep, but these exemptions vary depending on the state in which you live.
Once you have liquidated your assets and paid your creditors, any remaining debts will be written off unless you reconfirm the debt. Debt confirmation is when you voluntarily waive the protection of a bankruptcy discharge and agree to remain responsible for the debt. Confirmation is chosen to preserve certain assets and avoid liquidation.
Not everyone can file Chapter 7 bankruptcy. If your income is too high, you may be asked to file Chapter 13 bankruptcy instead.
Filing For Bankruptcy In Ohio
If you can’t file Chapter 7 bankruptcy, or if you have some money to pay off creditors and there are assets you want to keep, your solution may be to file Chapter 13 bankruptcy. In a Chapter 13 bankruptcy, you will:
Once these milestones are completed, the remaining debt eligible for forgiveness will be eliminated.
Chapter 13 is a good option for someone on a fixed income who has some money left over each month to pay off debts, but who needs some respite and extra time to catch up.
Depending on how you choose to file bankruptcy, it will have different effects on your assets and liabilities. In a Chapter 7 bankruptcy, many of your assets will be put into liquidation to pay your creditors with the proceeds. In Chapter 13, you will keep your assets while you work on a plan to repay your outstanding debts.
How To Know When To File Bankruptcy: Tips And Considerations
For small business owners with a lot of personal debt, bankruptcy can help them continue to operate their business. Please note that business debts are not relieved under Chapter 7 or Chapter 13 unless you are a sole proprietorship and are personally responsible for them.
Certain business assets may be excluded from Chapter 7 bankruptcy filings. For example, if your business is service-based and does not maintain equipment or significant inventory, you will likely be able to continue operating after repaying your business debts through bankruptcy.
No form of bankruptcy can alleviate student loan debt. Some people, such as some government employees, qualify for non-bankruptcy student loan forgiveness.
If you need help managing your student loan debt, you should ask your creditor for help managing your repayment options or look into debt consolidation.
Bankruptcy In New Jersey
In your bankruptcy filing, your home and mortgage will be listed as assets to determine your ability to repay. Depending on the type of bankruptcy filing, the impact on your mortgage may have different effects:
If you choose to reaffirm your mortgage in a Chapter 7 bankruptcy proceeding, you may be stuck with liability for the loan after the bankruptcy proceeding ends. If you can’t repay, you won’t be able to file for Chapter 7 bankruptcy again for several years, and your creditors can sue you to recover the loan.
To declare and file bankruptcy, you must complete a credit counseling course to learn about bankruptcy, alternative options, and how to manage your finances on your own.
After completing the course, you must file a petition with the U.S. Bankruptcy Court in the federal judicial district where you reside. This petition will list your:
Can I File For Bankruptcy Without A Lawyer
You must also attach a copy of your most recent tax return with your petition. You can have a lawyer prepare your application or obtain bankruptcy forms and instructions from U.S. courts.
Chapter 7 is sometimes called “plain bankruptcy.” Chapter 7 bankruptcy liquidates your non-exempt assets to pay off as much debt as possible. Cash from your assets is transferred to creditors such as banks and credit card companies, and you usually receive notice of your discharge within four months.
To file Chapter 7, you must pass the bankruptcy means test. The only people exempt from this obligation are disabled veterans who file for bankruptcy to repay debts incurred while on active military service or people with debts resulting from running a business.
Bankruptcy information will remain on your credit report for 10 years. But for many people, Chapter 7 offers a new beginning.
Free Texas Bankruptcy Guide
Chapter 13 bankruptcy is also known as reorganization bankruptcy. Chapter 13 allows you to repay your debts over a period of three to five years. For people who have a steady, predictable annual income, Chapter 13 offers a grace period. Any debts remaining after the grace period is repaid.
Once the court has approved bankruptcy, creditors must stop contacting the debtor. People who have gone bankrupt will then be able to continue working and paying off their debts over the following years, while retaining their assets and assets.
Most people take their financial obligations seriously and want to pay them off in full, but knowing when to file for bankruptcy and when to negotiate or use another strategy can help get you on the road to financial wellness.
Here is a list of questions that can help you assess your financial health and give you insight into whether filing bankruptcy may be right for you. These issues should also be discussed with your lawyer.
What Happens When You File For Bankruptcy?
Credit cards typically have high interest rates on open balances. This means your balance can quickly grow if you only make minimum payments. If your balance was high to begin with, it could quickly get out of control.
Constant phone calls from debt collectors can be an irritating and stressful reminder of your debt. Contact each of your creditors and see if they are willing to negotiate a lower balance or lower monthly payments.
Paying for basic needs with a credit card causes those purchases to accrue interest. For this reason, you should try to pay for these products only with your debit card.
Debt has many sources. Consolidating your payments into one large loan can help you keep track of your outstanding debts more easily with one monthly payment. This may also extend the repayment time as the new loan will have new payment terms.
What You Need To Know About Bankruptcy
Downsizing your home or getting rid of your car can be difficult, but taking these difficult steps may allow you to pay off your debts and avoid filing for bankruptcy.
Ideally, your expenses should be covered by your income, with some margin for emergencies. If your monthly payments exceed your take-home pay, you are a potential candidate for bankruptcy.
Uncertainty about the total outstanding debt is a cause for concern. Whether your balance has grown and you are unaware of the total, or you have forgotten about the creditors who sent your debt to collections, you should consider alternative repayment options if you cannot determine how
