Realizing that you have more debt than you can handle is a frightening event. There are two things that you can do. One of these is that you can ignore it and hope that it all goes away. The second is that you can work to have the debts taken care of. If you choose the more responsible option, trying to take care of the debt, you might choose to look into the option of filing for bankruptcy.
Individuals who are going to file for bankruptcy typically have two options – Chapter 7 or Chapter 13. The primary difference is that Chapter 13 requires you to make repayments to the court. Chapter 7 doesn’t require you to make regular payments to the court. When you file a Chapter 7 bankruptcy, you have to meet a means test. This is based on your income to determine if you make more or less than the state’s household mean income amount for a family of your size. If you are over the median you can still file bankruptcy, but it will be a Chapter 13. This does not mean you are paying your creditors in full, but you will pay something.
If you pass the means test and file Chapter 7, your assets that are non-exempt could be liquidated by the bankruptcy court. The proceeds will go to pay off the debts you have. If there is a balance that remains after that, it is discharged. You won’t have to make any payments to the trustee.
One positive aspect of a Chapter 7 bankruptcy is that it doesn’t take as long as a Chapter 13 bankruptcy to finish. The bad news is that it might require you to give up some of your property. However, if you might lose assets in a Chapter 7, you can file a Chapter 13 to protect your property. You should carefully balance the pros and cons of all your options so that you can make the decision that you feel is in your best interests. One type of bankruptcy is not better than the other. It all depends on what is best for your situation. We will explain your options at the initial free consultation.