Having debts hanging over your head can be stressful, but when even minimum payments are impossible, it can be too much to handle. It's time to take some serious action, starting by taking a close look at your budget and cutting out the things that aren't necessary. You might also be able to work with your creditors for reduced payment plans or interest rates to make your monthly expenses more manageable. Still, you may get to the point where your best option is to file for bankruptcy, which can be a welcome relief. While bankruptcy can release many types of debt, you can worry about the immediate and long-term consequences of filing. You may have heard stories of people losing everything they have, just to get out of debt, but there are many safety nets in place to protect your assets and livelihoods. .
For your benefit
The point of bankruptcy is not to leave you destitute as a punishment for your debt; it was created to guarantee consumers a way to get into debt and the possibility of a fresh start. This does not mean that you will not have any loss as a result of your bankruptcy. Depending on your income, debts, living expenses, and the type of bankruptcy you choose, the court may need to seize part of your property and sell it to pay off your creditors. Fortunately, there are many exemptions that we can use to protect your property and possessions.
The first decision we will make is to choose the bankruptcy chapter that will work best for you. We will perform the means test, which will determine whether you have the “means” to repay your debt, depending on the specifics of your situation. If you pass the test, you are eligible for a Chapter 7, which discharges unsecured debt. Most people who file Chapter 7 are able to keep all of their assets because these cases are usually “no asset” cases. If you have secured loans, such as a car or a home loan, you can choose to keep the property as long as you stay up to date on payments and the property is insured. If, after reviewing your budget, these payments are no longer reasonable for you, you can choose to end the loan by returning the property. The court trustee can then decide whether it would be beneficial to reimburse the creditor on the residual value.
A Chapter 13 can be a good choice if you have assets that would be lost in a Chapter 7 (or if you don't pass the means test.) It reconfigures your debts and you make payments in court for 3-5 years. This would be considered a full payment of your secured debts, and after your repayment period, the remaining unsecured debts are discharged. A Chapter 13 allows you to keep your property while taking care of your debts.
Do not wait
Many people avoid declaring bankruptcy because they are afraid of the consequences and fear losing property, when in reality it may be the best choice they have ever made. If your options are confusing you, give me a call so we can discuss your situation.