Are you drowning in debt? Do you and your family struggle to make your monthly payments? Do you worry about how you will pay for your necessary living expenses? If so, you’ve probably already started to consider bankruptcy. Filing for bankruptcy offers people in severe financial distress relief from the overwhelming burden of debt; a chance to start fresh financially.
Bankruptcy offers many benefits in addition to wiping the slate clean for a fresh start. But it isn’t a free pass; there are serious issues to consider before moving forward with the decision to file.
Will Filing Bankruptcy Help in Your Situation?
Do your due diligence before moving forward to determine if declaring bankruptcy would help in your specific situation. While no one should take bankruptcy lightly, it’s often the best way to move forward and get back on your feet after debt has knocked you down. But how do you know if bankruptcy is the right choice with the best opportunity to relieve your debt?
Bankruptcy is a legal procedure used to discharge debt for consumers who either won’t be able to repay the debt or who do not have the means to repay the debt in their current situation. There are two main types of consumer bankruptcy: Chapter 7 and Chapter 13.
In Chapter 7 bankruptcy, nonexempt assets belonging to the filer are liquidated if there is expected to be enough proceeds to make a material distribution to creditors. The proceeds are distributed towards the debts. Filers must pass the means test before filing Chapter 7 bankruptcy. The means test is in place to make sure that the court isn’t abusing bankruptcy law when granting a discharge of debt.
Chapter 13 bankruptcy is often called the wage earner plan and is for bankruptcy filers with a steady income. In Chapter 13 bankruptcy, filers pay back all or part of their debt through a bankruptcy court-approved payment plan over three to five years.
In most cases, bankruptcy does not protect you from debts incurred after filing. All types of liability are not eligible for bankruptcy. To determine if the majority of your debt is eligible for bankruptcy discharge, discuss it in detail with a bankruptcy attorney.
Is it Worth the Negative Consequences?
Bankruptcy will hurt your credit worthiness if your borrowing opportunities are now high. It will raise your borrowing opportunities if your credit score is very low. The bankruptcy remains on your report for ten years if you file Chapter 7 and seven years if you file Chapter 13. When filing Chapter 7 bankruptcy, you may lose assets (depending on the amount of equity involved).
If you are considering filing for bankruptcy and you need to discuss the pros and cons of filing, please don’t hesitate to get in touch. Most bankruptcy offices in the Chattanooga area don’t have a single Consumer Bankruptcy Specialist on staff. Our office is the only office in the Chattanooga area with two! You are in good hands with Kenneth C. Rannick P.C.