What Type of Bankruptcy Is Right for You and How a Bankruptcy Attorney Can Help?
If you have made the difficult decision to file for bankruptcy, it is important that you understand your options. The right type of bankruptcy for you will depend on your unique financial situation and your objectives. A bankruptcy attorney can discuss your specific circumstances and objectives to help you determine which form of bankruptcy to file.
While there are many different forms of bankruptcy, most consumer debt is discharged through either a Chapter 7 or Chapter 13 bankruptcy. There is no “right” form of bankruptcy for all situations. In some situations, Chapter 7 provides greater benefits while others may prefer Chapter 13 because of their own situation. Below, the basics of each of these bankruptcy types are discussed, along with some of the advantages and disadvantages of each option that are explained by a Peoria, IL Bankruptcy Attorney.
Chapter 7
Chapter 7 is a liquidation of assets. The bankruptcy trustee sells property and pays off as much debt as possible out of the proceeds of the sale. However, there are many exemptions under state and federal law that helps you protect some of your property. Any unpaid debt that is made part of the bankruptcy is discharged. You do not have to repay any of this debt.
There is not a cap on the amount of debt that can be discharged through Chapter 7 bankruptcy. However, certain types of debt cannot be discharged, such as tax debt, child support or federal student loans. You must pass the means test to qualify for Chapter 7 bankruptcy. This form of bankruptcy is only available to individuals with little or no disposable income.
Advantages of Filing Chapter 7 Bankruptcy
There are several advantages to filing for Chapter 7 bankruptcy. It gives you a fresh start since you get rid of most of your debt. You are also able to keep your future income. You will not be subject to hefty payments as part of a payment plan. Debts are discharged relatively quickly, often in as little as three months.
Situations to Consider Filing Chapter 7 Bankruptcy
Some situations in which you might consider filing for Chapter 7 bankruptcy include:
You have suffered a recent situation that makes paying off your debt difficult or impossible, such as divorce, a health crisis, the death of a family member or a job loss
You are unemployed and have few assets
You are underwater on your mortgage
You want to quickly discharge your debt
You want to discharge most of your debt
Chapter 13
Chapter 13 bankruptcy restructures your debt and puts you on a payment plan, usually for three or five years. It allows you to keep your property and you do not have to liquidate your assets. Any debts that you cannot pay off during the repayment plan are discharged.
Only individuals are eligible to file for Chapter 13 bankruptcy. There are caps to the amount of debt that is made part of a Chapter 13 bankruptcy filing. To be eligible for this type of bankruptcy, you must have sufficient income to make payments to creditors each month. Priority debts and secured creditors must be paid in full. Unsecured creditors must be paid what they would have been entitled to in a Chapter 7 bankruptcy.
Advantages of Filing Chapter 13 Bankruptcy
Chapter 13 bankruptcy does not require you to sell your assets, so you can keep more of your property. It can also allow you to pay off debts that cannot be discharged in a more manageable fashion. People who are morally opposed to discharging debts may feel more comfortable with a Chapter 13 filing.
Situations to Consider Chapter 13 Bankruptcy
Some scenarios to consider Chapter 13 bankruptcy include:
You want to keep your home – Chapter 13 is often used when debtors want to keep their homes. They may be able to repay their arrears during the life of the repayment plan. Chapter 13 might allow you to avoid foreclosure and possibly remove second or third mortgages to make payments more manageable.
You want to keep equity in your home – If you have more home equity than the exemption limit, Chapter 13 may help protect your home.
You want to keep your property – Chapter 7 liquidates your non-exempt assets while Chapter 13 may be able to help you keep more of your assets.
You owe taxes – This type of bankruptcy can give you more time to pay off unpaid tax debt.
Others are attached to the debt – When you file under Chapter 7, creditors who cosigned for the debt will still be liable even if you are not. Codebtors can be protected under Chapter 13.
How a Bankruptcy Attorney Can Help
A bankruptcy attorney can discuss the eligibility criteria of each form of bankruptcy. He or she can discuss the advantages and disadvantages of each option and help you determine which is the best type of bankruptcy to file for given your specific circumstances. Additionally, he or she can help to protect your assets, claim as many exemptions on your behalf as possible and work out a repayment plan that you can manage, when applicable. Your bankruptcy attorney will be responsible for filing all of the necessary documents and will work to protect your rights at each stage of the process. He or she will also work closely with the bankruptcy trustee to provide the necessary information in a timely manner and to ensure you are compliant with the bankruptcy process and its regulations.
Contact Charles E. Covey Attorney at Law for Help with Your Bankruptcy Case
If you would like help deciding which type of bankruptcy to file or other aspects of your bankruptcy case, Peoria, IL Bankruptcy Attorney Charles Covey can help. Mr. Covey has practiced bankruptcy law for more than 30 years and dedicates his practice exclusively to bankruptcy and debt relief matters. He has helped thousands of clients file Chapter 7 or Chapter 13 bankruptcy. He can consult with you about the best type of bankruptcy to file based on your specific circumstances. Contact us online or call (309) 674-8125 to schedule a confidential consultation.