Should you File for Bankruptcy?
Have you been struggling with debt and can’t seem to manage your finances? Do you want to put a stop to debt collectors from constantly harassing you to make sure you pay all of your debts? Or afraid of home foreclosure due to insurmountable unpaid debt? Then your last resort would be to file for personal bankruptcy.
When you declare bankruptcy and immediately file the necessary paperwork to start the bankruptcy proceedings, the United States bankruptcy court will:
- put a stop to creditor harassment,
- help you protect your properties,
- stop wage garnishment – or the legal withholding of a portion of your paycheck by the state to pay your creditors, and
- give you dismissal from paying most of your debts.
Your Bankruptcy Options
Of course, before you file for bankruptcy, you need to know your available options, the different bankruptcy chapters, and which of the chapters fit your debt situation best.
If you file for personal bankruptcy, you either need to file for Chapter 7 or Chapter 13.
Chapter 7 Bankruptcy
This type of bankruptcy is the most straightforward and is known as liquidation bankruptcy since it allows the debtor to discharge or wipe out most of your debts. Chapter 7 works well for individual debtors who don’t have enough disposable income to make monthly payments on their debts.
In a Chapter 7 bankruptcy case, you will be required to turn over your assets to the court-appointed bankruptcy trustee for liquidation.
Chapter 13 Bankruptcy
Also called the wage earner’s plan, Chapter 13 focuses more on the reorganization of your finances. With this chapter, you are required to pay your debts through a repayment plan after court-order negotiations.
Which is better?
It usually depends on you, but most people who seek to avoid foreclosure and get out of debt would file for Chapter 7 as it is faster and cheaper than Chapter 13.
Chapter 7 Bankruptcy Process
When you go bankrupt, it gives off a bad impression to most people, and it stays in your credit report for a long time. But if you’re looking for faster debt relief, then you should file a bankruptcy petition immediately.
Here are the important things you need to do to file for Chapter 7:
Get yourself a trusted bankruptcy attorney
The bankruptcy case can be draining for someone who is not very familiar with the bankruptcy laws and proceedings. Yes, you can always do it on your own, but hiring an adept and accomplished Pasadena bankruptcy lawyer can make the whole process easier and more convenient for you.
So, before you do anything else, seek legal help from a bankruptcy law firm with a good record of bankruptcy services in your state.
Fill out the bankruptcy forms
With your bankruptcy attorney’s help, you should fill out the correct forms and list all of your assets, liabilities, income, and expenses, and any existing leases.
Pass the two-part means test
Before filing the petition to start the bankruptcy case, the bankruptcy court will first evaluate your income and paying capacity. First, the court will check if your total income is lower than the median income for the past six months. The court will deduct your living expenses, allowances, and other expenditures from your monthly income. If there is no disposable income left, this means you qualify for the petition you filed for.
Will you be debt-free after the bankruptcy proceedings?
Unfortunately, the answer is no.
It is important to remember that filing Chapter 7 will not cancel out all of your debts. Some debts are unforgiven even after bankruptcy is filed.
Those non-dischargeable debts are:
- Child support
- Court fines and penalties
- Payment for personal injury you caused
- Income tax debt
- Student loans (but this is a case to case basis)
Debts that can be discharged:
- Medical bills
- Mortgage loans
- Car loans
- Credit card debt
- Personal loans without collateral
- Past-due utility bills
- Any other form of unsecured debts – or debts without collateral
Benefits of filing for Chapter 7
Yes, bankruptcy can hurt your credit, but there are benefits to filing for bankruptcy, too:
- Court-mandated automatic stay – stops creditor harassment, foreclosures, and repossession.
- An option to file for exemption for a property you wish to keep after bankruptcy
- Discharged debts – as discussed earlier, bankruptcy will eliminate most of your debts after the process.
- Faster process – the whole process of a successful bankruptcy case can take four to six months.
- Fresh start – you will be given a chance to get back on track and rebuild your credit again.
Seek Legal Help
You should not go through the process of filing for bankruptcy alone. The process can be taxing, which may result in errors in filing. Contact our Pasadena bankruptcy law firm for a free consultation to get a feel of what it’s like to have a reliable bankruptcy attorney in Pasadena by your side.