What are the Different Types of Bankruptcy I can file? You’re sitting at the kitchen table, staring down at all collection notices that have been piling up in your mailbox. You begin to wonder how on Earth you’re going to make things work. Maybe you just had a hospital visit and lost your job. And then you realize you might have to declare bankruptcy.
Bankruptcy isn’t a decision to make lightly, but it might be your only option. It’s important to know exactly what filing for bankruptcy in Montgomery, or wherever you live, actually means and what the different types of bankruptcies are in order to make the most informed decision.
First, what is bankruptcy? Bankruptcy, simplified, is when you go before a judge and tell them you can’t pay your debts. Depending on the situation, the judge will either erase your debts or make a plan for you to pay them back. There are many reasons why individuals file for bankruptcy. But bankruptcy is a major life event that affects more than just your finances. It can follow you when you’re trying to apply for a job, buy a house, or start a business. That is why it is important to speak with a local bankruptcy attorney in Prattville, or wherever you live, to go over the process and implications with you.
It’s also essential to note that certain types of bankruptcy do not usually wipe away student loans, government debts including fines, taxes and penalties, reaffirmed debt, child support or alimony. So, if those are your only debts, other types of bankruptcy may be a better option.
There are a few different kinds of bankruptcies. In fact, there are six different types of bankruptcies but the main two Chapter 7: Liquidation and Chapter 13: Repayment Plan.
Chapter 7 is the most prominent form of personal bankruptcy for individuals. It is often referred to as liquidation or straight bankruptcy. Your assets can be sold off to pay off your creditors under the supervision of a trustee appointed by the court. So, it is important to know which assets are protected and which are not before you file a Chapter 7 case. Normally, any unpaid unsecured debt (such as credit card debt or medical bills) is eliminated. However, this excludes the debts that aren’t normally discharged through bankruptcy, like school loans and taxes.
Only when the court determines you don’t make enough money to pay back your debts can you file for Chapter 7 bankruptcy in Birmingham, Alabama. The means test, which compares your salary to the state average and examines your finances, forms the basis for this judgment. It determines whether you have the disposable income (also known as the means) to repay a sizable portion of the debt you owe to creditors. If your income is insufficient to do so, you can be eligible for Chapter 7. You cannot file for Chapter 7 bankruptcy again for eight years after filing, and it remains on your credit report for ten years.
While Chapter 7 bankruptcy frequently results in debt forgiveness, Chapter 13 bankruptcy essentially reorganizes your debt. You can settle all of your secured debt as well as a portion of your unsecured debt over the course of three to five years if the court approves a monthly payment schedule. The amount of your monthly payments is determined by your income and debt load. But the court also has the authority to place you on a strict spending limit and monitor your whole spending.
In contrast to Chapter 7, this type of bankruptcy enables you to keep your assets and make up any unavoidable debt. Additionally, Chapter 13 might prevent a foreclosure by providing you more time to pay your mortgage on time.
Anyone who has debts under a certain amount, will be eligible to file for Chapter 13 bankruptcy. Additionally, you must have all of your tax filings current. Additionally, you should be aware that a Chapter 13 bankruptcy remains on your credit report for seven years and that you cannot file for one until two years have passed. If you are considering a bankruptcy then it is best to speak with a bankruptcy attorney in Alabaster, or wherever you live, before filing it.
Attorney Steven A. Harris regularly blogs in the areas of family law, bankruptcy, probate, and real estate closings on this website. Mr. Harris tries to provide informative information to the public in easily digestible formats. Hopefully you enjoyed this article and feel free to supply feedback. We appreciate our readers & love to hear from you!