The Ins and Outs you Need to Know When Filing for Bankruptcy
Wednesday, July 13, 2016, 6:00 PM | Leave Comment
If you are considering bankruptcy, then it’s important that you get all your facts straight before you proceed. By understanding how each form of bankruptcy works, you can decide which option is best for you.
To help you get started, here is a breakdown of the key differences between Chapter 7 and Chapter 13, the two main types of bankruptcy that you can pursue if you are an individual in financial distress, along with an overview of how exempt assets and nondischargeable debts work.
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Chapter 7 Bankruptcy
Chapter 7 revolves around liquidating your assets. This generally means that you will lose more of your property and money when filing for Chapter 7 than you would under Chapter 13.
However, Chapter 7 is also a much faster process, which means that it will eliminate your debt in a much shorter window of time.
This ultimately means that you will be freed of many of your debts in as little as a few months, with most cases being resolved in less than half a year.
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Chapter 13 Bankruptcy
To contrast with Chapter 7, Chapter 13 restructures your debts into a more manageable payment plan. This means that you will still need to make regular payments over the course of 3-5 years, but it usually allows you to keep a larger portion of your assets than you would get to keep under Chapter 7.
To help you figure out whether Chapter 13 would be better than Chapter 7 in your situation, it’s a good idea to talk to an expert like someone from Lazaro Carvajal.
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Exempt Assets
There are a number of assets that are exempt from bankruptcy, but the type and size of assets can vary dramatically between states.
The federal exemption list is fairly generous, allowing you to keep roughly $24,000 of equity in your home, roughly $24,000 of any personal injury damages, and over $12,000 in household goods, but state exemptions can be much stricter.
It’s critical that you thoroughly research the exemptions in your state before proceeding with bankruptcy.
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Nondischargeable Debts
Unfortunately, bankruptcy doesn’t work in all cases. Certain debts cannot be discharged, such as student loans and parking tickets.
If your most important debts cannot be discharged, then bankruptcy is probably not the right option for you, since it could end up leaving you in an even worse financial situation than before.
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The Road Ahead
If you believe that bankruptcy might be a viable option for you, then it’s a good idea to talk to an attorney with experience in the subject.
Such an expert can help you determine how much money you could save through bankruptcy, how it would affect your future prospects, and what alternatives are available.
