The decision to file bankruptcy should not be made without first giving the issue careful thought and consideration. While bankruptcy is a very real solution for a lot of people, for others it may not be the right choice. For instance, if you are likely to need an extension of credit for business purposes, bankruptcy may impact your ability to get a loan that also requires a personal guaranty. This might mean you are not able to start up your own company, or keep an existing operation going. Before you file for bankruptcy, do your homework so are prepared for what comes next.
Three things to know before filing for the protection of bankruptcy include:
- Which chapter of relief you qualify to file, and the difference between the two chapters available to consumers. Consumer bankruptcies are filed under either Chapter 7 or Chapter 13, and the two are not identical. A Chapter 7 case is more like a liquidation of debt, where your unsecured obligations are eliminated. Unsecured debt includes high interest rate credit cards, and most signature or payday loans. Freeing up money used to pay monthly payments on this type of debt usually eases the financial burden of most debtors, and allows them to meet their monthly obligations without struggle. A Chapter 13 is a plan of debt repayment similar to loan consolidation. The Plan can last up to 5 years and requires the debtor to make monthly plan payments to the bankruptcy trustee. The trustee then pays your monthly obligations to creditors, pursuant to the terms of the plan. Most debtors prefer to file a Chapter 7 over a Chapter 13 due to the shorter time frame, and the ability to discharge unsecured debt.
- How the means test works, which is a complex mathematical computation that is used to determine if you qualify for a Chapter 7. The test will take into consideration your total income and how it compares to your total secured debt. If the equation shows you have disposable income left over each month to put towards unsecured debt, you will be required to file a Chapter 13.
- What property you will keep, and what you will surrender back to the lender. Once you identify which pieces of collateral you can do without, you will have a better idea of your future financial picture. This is so because even in bankruptcy you have to maintain payments on things you keep (like your house or car).
We can help you figure out what type of bankruptcy best meets your needs, and which chapter you qualify to file. We will also give you guidance on when to reaffirm a debt, and when to surrender collateral back to the creditor. Call us for more information.
For more information about finances and bankruptcy, contact us at www.DsouzaLegalGroup.com. We will help by coming up with solutions that work for you.