The two main types of bankruptcy to file for are Chapter 7 and Chapter 13 bankruptcy. If you have fallen on hard times, filing for bankruptcy may be the best option to relieve debt. The overwhelming feeling of struggling with debt may make the process of filing overwhelming. Before you file for bankruptcy or determine a type of bankruptcy to file for, consult with a bankruptcy attorney to assess your personal financial situation and determine whether any alternatives to filing are available to you.
Chapter 7
Chapter 7 bankruptcy allows you to discharge debt by selling off unprotected assets to creditors. This option does not require a repayment plan for your debt. In this type of bankruptcy, a trustee is appointed to sell the debtor’s unprotected assets to repay the debt. For most people, this should be a last resort. However, it can help repay debt, leading to a debt-free and promising financial future.
Exempt Property
Despite the need to sell off assets, some personal property is protected or “exempt” from being sold off to creditors. Protected assets include:
· Up to $27,900 in real property used as a primary residence
· Up to $4,450 of the value of a motor vehicle
· Household furnishings worth $700 or less, up to $14,875 total
For full information on Chapter 7 bankruptcy exemptions, consult with your bankruptcy attorney and review the exemptions for your state.
Chapter 13
Chapter 13 bankruptcy requires those filing to create a plan, also known as a wage earner’s plan, to pay off all debts. This is a great option for those who earn regular income to show the court that they can reorganize their debts and pay them off over time. To be eligible, you must have filed all required tax returns over the past four years. Other requirements may vary by state.
Repayment Plan
The repayment plan created must show that you can pay off debts over the course of 3-5 years through monthly payments. This is best created with the help of your bankruptcy attorney, as they can help you gather all the supporting documentation you need to file. For example, in Pennsylvania, you are required to submit several documents within 14 days, including property you claim as exempt and calculation of disposable income. A Pennsylvania bankruptcy attorney will ensure that you understand all the required documentation and help you weight your options to create your repayment plan within the 14 days.
Which Type of Bankruptcy Should I File For?
The type of bankruptcy that you should file for depends entirely on your financial situation. There is no one specific type of bankruptcy that is best for everyone. But, having a trusted and experienced bankruptcy attorney by your side makes the decision easier. Through them, you will gain a better understanding of your options and be able to assess alternatives with someone who has a strong knowledge base of financial situations like yours, as well as bankruptcy. While you can certainly file for bankruptcy on your own, an attorney is there to represent you through the entire bankruptcy process. This involves everything from filing to standing before a judge to present your case. In cases of serious financial hardship, you do not want to risk any delays in the bankruptcy filing process.
Also Read: Managing Your Financial Responsibility
