Bankruptcy is Designed To Give People a Fresh Start When Needed
It is never fun to consider declaring bankruptcy. But believe it or not, bankruptcy can be a smart financial decision in certain situations. Bankruptcy is designed to give people a fresh start when they need one. And, if you file for bankruptcy, you are taking a big step towards getting your finances under control. That is always a responsible goal.
But it is a serious decision with consequences. Your credit rating may take a temporary hit (as you may know already) and your spending habits may need to change. How do you know when the pros of bankruptcy outweigh the cons?
First, know the basics of what bankruptcy does. Bankruptcy can eliminate all your debt, but the courts treat different kinds of debts differently. So, knowing what kind of debt you have is important.
Below are the debts bankruptcy ends or make easier to pay overtime:
- Credit card debt
- Car loans and lease obligations
- Medical debt
- Apartment and home lease obligations
- Utility bills
- Old cell phone and cable/satellite bills
- Lawsuit judgments
- Personal loans
- Payday loans
Below are some debts that bankruptcy has limited or no direct impact upon. However, as your other debts are discharged or reduced, these should become easier to manage.
- Student Loans
- Some (but not all) Back Taxes
- Spousal and Child Support
- Court Fines and Fees
- Any debts you forgot to list in your bankruptcy paperwork
If any or all of the following circumstances apply to you, it might be time to file:
- Creditors are suing or garnishing you for unpaid debts
- You are facing foreclosure or eviction
- You are facing repossession of your vehicle
- You are contemplating paying off debt with debt – debt consolidation loans and cash advances on credit cards
- Paying today’s debt by jeopardizing your future by using retirement funds
Qualifying For Bankruptcy
The two types of bankruptcy most often utilized by individuals are Chapter 7 and Chapter 13.
Chapter 7 bankruptcy requires a filer to pass a Means Test to determine eligibility. The Means Test can be complicated, and it is best to consult with an experienced attorney to determine how it will impact an individual filer. In simple terms, any debtor with below median income should pass the Means Test and be eligible for Chapter 7 bankruptcy. Those with above median income will be required to go through a series of calculations involving average income, federal guidelines and actual expenses to determine eligibility. But importantly, many above median income filers, with the help of an experienced attorney, will be able to pass the Means Test and be eligible for Chapter 7 relief.
Chapter 7 Bankruptcy
Otherwise known as “straight bankruptcy”, Chapter 7 is designed for individuals with no way to pay their bills otherwise. This type of bankruptcy discharges as much of your unsecured debt as possible, including credit card debt, lawsuits, payday loans, personal loans, medical bills and any other debt with no collateral associated with it. Secured debt can also sometimes be cancelled or modified depending upon applicable exemptions and the filers need for the assets securing debt post-petition.
The process usually takes anywhere from four to six months. It is typically much quicker than Chapter 13 bankruptcy. In the vast majority of Chapter 7 bankruptcies, the filer is able to protect his or her home, car and other assets. But every case is different, and it is important to have the guidance of an experienced attorney to be certain that your applicable exemption will allow you to protect your assets. If not, the bankruptcy court may be entitled to liquidate your non-exempt assets.
If you are able to pass the Means Test, and protect your assets through applicable exemptions, Chapter 7 bankruptcy may be your best option But if not, Chapter 13 bankruptcy may provide a good alternative.
Chapter 13 Bankruptcy
Also known as “reorganization bankruptcy” or “wage earner’s bankruptcy,” Chapter 13 is designed for people who have a consistent income and who want to keep property that could not be protected in a Chapter 7 bankruptcy. Chapter 13 may also allow a filer to address and provide for debts that would not be discharged in a Chapter 7 bankruptcy by proposing a plan of between three to five years to make payments towards their debts. The plan, once approved by the bankruptcy court, can provide significant relief beyond mere cancelation of debt. An experienced bankruptcy attorney may be able to help craft a plan that reduces the amount of debt owed, catches up on past due house or car payments, lowers interest rates, protects co-signers and much more.
Bond & Botes Helps People Struggling with Debt
The attorneys at Bond & Botes have devoted decades to helping people resolve debt and move forward into more stable financial futures. We know how important accurate information is, so we offer free consultations from the comfort and safety of your own home or office. We can meet by phone and/or video. Let us solve your financial problems. There is no obligation, and that means no downside to gathering the information you need to make good decisions about how to break the cycle of debt stress and move forward. We can answer all your questions regarding Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, stopping a foreclosure or wage garnishment, avoiding liens, stopping lawsuits, discharging medical debt, personal loans, payday loans, credit card debt, etc. We can alleviate your stress! We want to help and we can help you!
Bond, Botes, Sykstus, Tanner & McNutt, P.C.
102 South Court St, Suite 314, Florence, AL 35630
Phone: 256-760-1010 • Fax: 256-760-1023
Office Hours: Monday – Friday • 8am to 5pm
No representation is made that the quality of legal services to be performed is greater than the quality of legal services to be performed by other lawyers.