The bankruptcy law is a federal legal proceeding that gives a fresh start to debtors who are not able to pay their debts. The bankruptcy process and benefits when declaring bankruptcy differs depending on the type of bankruptcy you file. The bottom line is that either type gives you another chance to start financially. Filing for bankruptcy is a powerful tool for debtors when you are in financial debt, but it stays on your credit report for 7 to 10 years, affecting your ability to be approved for future loans.
Benefits of Filing for Bankruptcy
Filing bankruptcy enables you to:
Discharge most, if not all, of your debts
Unsecured debt is usually wiped out by bankruptcy. Credit card debts, medical bills, utility payments, and personal loans are some examples of unsecured debts. How quick your debt will be discharged depends on the bankruptcy type you avail.
Stop creditor harassment and collection until the bankruptcy court sorts your debts
After a bankruptcy petition is filed, an automatic stay order is given by the court. This stops the creditors from any collection efforts against you, including lawsuits and wage garnishments.
Stop the foreclosure, repossession, or eviction temporarily
Bankruptcy petition also stops these actions from taking effect while the bankruptcy case is still pending. Foreclosure and repossession are also put on halt along with evictions in the middle of litigation. However, when there is already a judgement by the court prior to the filing of bankruptcy, you may still be evicted. On the other hand, the bankruptcy court may also order the creditor who already got hold of the property to return the same.
Limitations of Bankruptcy
Declaration of bankruptcy does not eliminate all kinds of debts. There are exemptions such as student loans, alimony, child support, reaffirmed debt, taxes, court fines and penalties, even debts you forgot to list in your bankruptcy papers. Bankruptcy fraud debts may not be eliminated if a case was filed and the creditors convinced the judge that the debt should remain.
Filing for bankruptcy also does not stop a secured creditor to foreclose or repossess items you cannot afford. Bankruptcy only removes debts; it does not wipe liens. The lien will stay until the property gets paid.
Bankruptcy Chapter 7 and Chapter 13? Which One Should I Choose?
There are various types of bankruptcies but Chapters 7 and 13 are the most common types filed.
Chapter 7 bankruptcy or “liquidation” quickly discharges the debts you owe. There will be a trustee that will sell and liquidate your nonexempt assets then use the proceeds to pay off the creditors. The advantage of this type is that it gives you a completely fresh start. Earned wages and acquired property after the bankruptcy date are yours and the bankruptcy court or creditors cannot go after them. There is also no minimum debt required and the case is usually finished in 3 to 6 months. To qualify for Chapter 7, you will need to pass the means test. The means test will determine whether your income is less than or above the median income in your place. If it is below the average median income, you will automatically pass. If it is more than the, you might need to dispose of more assets. You will also need to undergo credit counseling. Finishing a credit counseling course that is approved by the government is a requirement before you can proceed with filing for Chapter 7 bankruptcy.
Chapter 13 bankruptcy or “reorganization” allows you to create a repayment plan that enables you to pay off your debts over time. This kind of bankruptcy filing requires you to have a stable job because you will need to pay it off monthly for 3-5 years or for how long the repayment plan is in effect. The amount you will need to pay depends on your monthly income, living expenses, type of debt you owe, and your properties. The advantage of this type is that you don’t lose property unlike in Chapter 7 where most are sold off. You have more time to pay off debts, you can file anytime, you can file repeatedly, and you have immediate protection from creditor collection and wage garnishment.
Are you considering filing for bankruptcy in Las Vegas or Arizona?
Declaring bankruptcy might be done without the help of a debt lawyer but the bankruptcy process might be complex and confusing for those not explicitly trained to deal with it. If you are overwhelmed by it and do not want to commit any errors, availing the services of a bankruptcy attorney will be a great help. We, at WantaFreshStart, LLC are here for you. Our experienced bankruptcy lawyers will lay down all the options available to you in order for you to make an informed decision on which bankruptcy chapter suits you best. Call us now for a free consultation.