FAQ About Filing for Bankruptcy
When you’re feeling the weight of your debts crashing down on you, you may not feel like there is anywhere to turn. Bankruptcy is often painted in a negative light, but for many people, it can be the ticket out of a terrible financial situation and an opportunity to start over.
However, with this financial freedom comes undeniable risk, which is why anyone considering filing for bankruptcy should know these following things:
- What is bankruptcy, and will the process wipe out all of my debts?
Bankruptcy allows the filer to catch up on their debts by having some discharged and some repaid. Depending on the type of bankruptcy, not all debts will be discharged. Unpaid child support, alimony, and taxes are not covered under bankruptcy, and neither are student loans in most cases. They only account for roughly 1% of all bankruptcies, or about 15,000 per year.
- What is the difference between chapter 7 and chapter 13 bankruptcy?
Chapter 7 bankruptcy is often called liquidation bankruptcy because those who file may lose some of their property. This is reserved for individuals and companies that will be unable to pay back their debts in the future and therefore must pay with collateral (i.e. property). Chapter 13 bankruptcy is when a filer is allowed the chance to reorganize their finances in order to make payments that they can afford on a schedule that works for them. Those filing for this type of bankruptcy must work with a bankruptcy lawyer and the courts to determine an appropriate repayment schedule and method based on income, property value, and debt load.
- Which bankruptcy option will allow me to keep my property?
While property loss may be avoided in chapter 7 bankruptcy, if you exceed the income limits of this type of bankruptcy but still face unmanageable debt, chapter 13 is likely the best option. Not all types of property are eligible for liquidation under chapter 7, however. So before filing for bankruptcy, talk to a lawyer about which types of properties may be at risk.
- Can I choose which type of bankruptcy to file? How do I choose the right one?
Bankruptcy is purely circumstantial, so it’s hard to make a blanket statement as a judgment call. The best choice when it comes to filing for bankruptcy is contacting a reputable lawyer in your area that is well-versed in bankruptcy law.
If you’re in a financial rut and are unable to pay back your growing debts, call the Law Offices of Craig L. Cook. Together we can help decide the best option for you.