If you have found yourself situated in dire financial straits, you might already be thinking that bankruptcy is a way out. While filing for bankruptcy can certainly help and it is not the monster the media usually makes it out to be, you still have to proceed with caution. For starters, you need to know which chapter of bankruptcy is going to be best for you and your unique financial situation: Chapter 7 or Chapter 13. Picking the right one can lead you back to monetary success and a stress-free life but picking the wrong one could put you back on the path of frustrations and uncertainties.
Differences Between Chapter 7 & Chapter 13
When most people imagine a successful bankruptcy filing, they picture themselves waving goodbye to all of their debts, and a significant portion of their own personal property. This notion more or less captures the idea of Chapter 7 bankruptcy. During this process, any debt that is dischargeable is dismissed entirely and permanently but at the cost of giving banks or creditors your valuable property that is not exempt.
There are some critical caveats to Chapter 7 bankruptcy, though. Many types of debt are not dischargeable, meaning they must be paid off eventually, such as most student loans, your obligations for a child or spousal support after a divorce, the money you owe due to a personal injury lawsuit, and income taxes on recently accrued. On the other hand, with careful planning and the assistance of a bankruptcy lawyer, you may be able to protect your property and even save your home. On the other hand, you might not even be able to select Chapter 7 bankruptcy at all; first, you will need to take a means test to determine if your income in the last six months was below the median income for your region.
Failing the means test – or having an income above the average – does not mean your bankruptcy choices have ended before they even began. Instead, you may be able to use Chapter 13 bankruptcy, which is generally considered the less-extreme form. In Chapter 13, you will reprioritize your debts and renegotiate when they are due, setting up a repayment plan over the course of three to five years. After dropping some dischargeable debts, you will still have debts to pay but they should be more manageable, and the trade-off is that you can expect to sacrifice very little to creditors and banks.
Figuring Out Your Best Bet
Choosing the bankruptcy form right for you requires much more information and insight than just flipping a coin. You should always retain the help of a renowned bankruptcy lawyer, such as the Long Beach bankruptcy attorneys you can find here at Leibowitz Law Group. We have more than 45 years of combined bankruptcy law experience that we can put to work for you, helping you through your financial crisis with as little stress as possible. Call today for a free case evaluation.