Everyone from retail chains, to individuals with medical and credit card debt, and even entire cities can file for bankruptcy. Bankruptcy is sometimes the only way out of debt and while it may have negative short-term effects, it provides a solution to a problem that so many of us will struggle with at some point in our lives. Financial experts and attorneys define the most common debt as “unsecured”. An example of very common unsecured debt is accrued credit card and medical debt. As we know, This doesn’t always happen as a result of a direct mismanagement of our funds. Life can throw us curve balls in the blink of an eye and put us into financial trouble quickly. A perfect example of this our country’s current crisis, the Covid-19 pandemic. There are also things to consider when deciding whether or not to file bankruptcy such as how it may impact your credit, how long the process takes, and the debt thresholds each type of bankruptcy requires. As every situation is different, so let’s discuss each of the most common types.
Chapter 7
This type is the most common type of bankruptcy and generally allows for a repayment plan to creditors of 4-6 months in length if agreed upon among all parties. In addition to the quick repayment plan, any remaining unsecured debt is discharged at the end so you can say goodbye to those remaining medical, credit, and personal loan debts.
Chapter 13
This type of bankruptcy is different from Chapter 7 in that it allows you to create a reorganization plan with the court to pay your secured debts as opposed to liquidating your assets. Unsecured debts are paid concurrently and any remaining unsecured debt is discharged at the end of the repayment plan which is typically between 3-5 years.
Chapter 11
This one is for businesses and is also a reorganization type of bankruptcy. It gives businesses time for restructuring and it can definitely be successful if the reorganization plan is successful. Another thing to mention is that The CARES Act has raised the financial threshold, allowing more businesses to declare bankruptcy. This allows for even more businesses to be protected from creditors while they make a new plan.
Important All types of bankruptcy will stay on credit reports for 7-10 years. The good news is that it is a way out of the nightmare of most debt. It can be a fresh start for individuals and businesses. If you’re considering bankruptcy or want to know more about, it is imperative to have an attorney on your side from the beginning.
The attorneys at Dsouza and Strachan Law Group have been helping people navigate bankruptcy for over 15 years. They have the knowledge and experience to guide you and your family to financial freedom. Contact Dsouza and Strachan Law Group today for a free consultation.