If you are considering bankruptcy, there is not a black and white answer. Every household is different and there are essential factors to consider before beginning the process.
What is Bankruptcy?
Bankruptcy is the formal process of eliminating all or part of the debt owed by an individual or business to help them repay what they owe. Declaring bankruptcy does have long-term consequences, especially on your credit. For up to ten years, bankruptcy will stay on your credit report making it difficult for you to open a line of credit and receive favorable rates on expenses such as cars or homes.
What is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is the most common type of bankruptcy that people think about. If someone files for Chapter 7 bankruptcy and their filing is granted, assets are sold to pay off some of the debt, while any remaining balances are usually eliminated. Not everyone who files for Chapter 7 bankruptcy will qualify though — a means test is performed to determine whether or not someone is eligible by obtaining a person’s current monthly income. The test will look at a person’s income coming in and expenses going out over the last six months before filing for bankruptcy to come up with an average, which is the current monthly income.
What is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is an alternative to those who do not qualify for Chapter 7. In a Chapter 13 bankruptcy plan, individuals who are eligible have an interest-free repayment plan that combines debts or allows an individual to repay them without being bothered by creditors. Chapter 13 is also a good option for individuals who have a large number of assets or too high of an income that would disqualify them from Chapter 7.
If you choose to file for bankruptcy, having those who know the process best can make all the difference. Contact our office today for further information about the bankruptcy process and how we can help.