If you’re falling behind on your bills, you may have considered bankruptcy. This is not an easy decision! Dealing with the courts taking possession of your assets sounds scary. There are some important things to understand when deciding whether to file for bankruptcy.
What is bankruptcy?
Bankruptcy is a legal proceeding involving a person (or an entity) who is unable to repay his/her outstanding debts. Bankruptcy is most often initiated by the debtor. All of your assets are evaluated and measured, and may be used to repay part of your outstanding debt.
Is bankruptcy right for me?
The fallout of filing for bankruptcy will last years, so it is best to understand all other options and talk to an attorney before filing. Some options to consider prior to bankruptcy include: pursuing a debt management or settlement program, living within a tight budget, and selling off some of your assets to pay off your debt.
Do I qualify for bankruptcy?
There is no minimum amount of debt you must have in order to qualify for either type of bankruptcy. There are two types of bankruptcy under the U.S. Bankruptcy Code: Chapter 7 and Chapter 13. There are important differences between the two types of bankruptcy:
- Chapter 7 bankruptcy, also thought of as liquidation bankruptcy, is meant for those with more limited income, and those who are unable to meet a minimum monthly payment on their debt. You will have to pass a means test to qualify for Chapter 7 bankruptcy—meaning that your income falls under the state median income (which is different for each state).
- Chapter 13 bankruptcy requires you to have a steady source of income. You must complete a court-ordered debt repayment program. You may be able to keep your property. There is a cap on the amount of unsecured debt and secured debt you can have. This type of bankruptcy is thought of as a reorganization.
How long does bankruptcy take?
The length of time bankruptcy takes depends on the type of bankruptcy:
- Chapter 7 bankruptcy often takes anywhere from three to five months to complete. This involves a court-appointed trustee taking possession of all your non-exempt assets and selling them off for a fair market price.
- Chapter 13 bankruptcy typically takes three to five years, but the length of time depends on your amount of debt and your income.
What are the implications of filing for bankruptcy?
Filing for bankruptcy will have a drastic effect on your credit health. However, the type of bankruptcy you file for and your amount of debt have varying effects on your credit score. Chapter 7 typically has more of an impact on your credit than filing for Chapter 13 bankruptcy. Chapter 7 bankruptcy takes up to 10 years to disappear from your credit report, while Chapter 13 takes up to 7 years to be removed. You can still get a loan after filing for bankruptcy. You will likely pay a higher interest rate on a loan, but you are still eligible, in many cases
Whether you are looking for advice about paying off or consolidating your debt, or, seriously considering bankruptcy, Evergreen attorneys are ready to provide assistance.
Call Evergreen for an initial consultation to start your journey with affordable legal support: (844)LEGAL-16 (i.e., (844)534-2516).
Disclaimer: The information in this blog post is provided as general information only and should not be construed as legal or other professional advice. Evergreen Legal Protection is not a law firm. Never substitute information obtained from the internet or this blog for professional advice and guidance from a legal professional licensed in your jurisdiction.