Ever wondered if you should file for bankruptcy after incurring debts? Bankruptcy refers to a system of federal law that allows businesses and individuals to get relief from debt. This system was created to help people make a fresh start financially. There are two types of bankruptcy: chapter 7 and chapter 13.
Chapter 7 is the liquidation bankruptcy, as it discharges most of your unsecured debt, such as credit cards and personal loans. You need to pass a means test and have a certain income. The entire process may last for about four months. Additionally, Chapter 7 fillers are able to keep most of their hard-earned assets.
Chapter 13 is the reorganization bankruptcy, which sets you on a repayment plan. This means that you have to repay creditors over time. Unlike in Chapter 7, there will be no liquidation of property. The entire process may take up to five years, though. Individuals with a regular income are eligible for this type of bankruptcy.
To figure out which to file, talk to your lawyer. As the Salt Lake City bankruptcy lawyers of ChristensenYoungLaw.com explain, “The more you know about your choices, the easier it is”.
The Process of filing for bankruptcy
When faced with any financial insolvency, the last option would be filing for bankruptcy. Nonetheless, the process is easier said than done. You have to explain to the presiding judge or trustee about how you got into this financial crisis. Furthermore, you have to list all your assets and outstanding debts.
Assets can be either exempt assets or non-exempt assets. You cannot use exempt assets to pay debts. Creditors can seize and sell non-exempt assets like recreational vehicles and other properties to finance the outstanding accounts.
After gathering all this information, you will have a bankruptcy trustee to ensure that you have paid all the secured debt within a given period. Subsequently, the court issues a stay that prevents creditors from confiscating your property. It also prevents them from pursuing a lawsuit against you.
Filing for bankruptcy does not end your money problems right away. Nonetheless, it can provide you with reprieve from anxiety and debt. Talking to an attorney will help you make the right move.