Deciding to file bankruptcy is a personal and difficult choice. Whether you’re in this position because of poor financial decisions or because of medical bills or other unforeseen issues, your next steps could be confusing.
As an individual, you have different bankruptcy options. But understanding which option is best for your individual situation can lead to confusion and uncertainty. Many people let that confusion prevent them from filing, which only puts them in more financial hardship.
What is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy protection is usually referred to as a clean slate. This is the case because all of your unsecured debts are wiped clean. When you are way behind on bills and are not able to make even your minimum monthly payments, Chapter 7 might be a good option for you.
However, you may have to give up some of your possessions in order to finalize your Chapter 7. When you file Chapter 7, a trustee will be appointed to your case. They will review your finances and sell certain items to pay your creditors. Some property will be exempt and the trustee will not be able to sell it to pay your debts. But be prepared to give up many items in an effort to reduce the amount you owe to your creditors.
What Debts Go Away Under Chapter 7?
Many of your items will be sold to reduce the amount of debt you owe. Most debt comes in the form of credit cards, medical bills, and other unsecured personal loans.
But there are some debts that cannot be discharged under Chapter 7 bankruptcy protection. These include:
- Child support
- Student loans
- Some tax debt
- Court fees
What is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy differs from Chapter 7 in several ways. The most obvious of which is that under Chapter 13, you repay your debts over a period of time directly to the bankruptcy trustee who distributes those payments to your creditors. After 36 to 60 months of making payments, any remaining debt is eliminated. In other words, Chapter 13 allows you to reorganize your finances.
Under Chapter 13, your personal possessions are not sold, so long as you are able to make your monthly payments. If you complete your payment plan, you then may be able to keep your possessions.
How Long Does Bankruptcy Stay with Me?
When you file bankruptcy, you must be aware that your financial life is changing. Filing bankruptcy is not giving up, however, it’s simply starting over.
But it might take some time before you are able to secure credit again for major purchases like homes or cars. When you file Chapter 7 bankruptcy, that will stay on your credit report for 10 years. Chapter 13 bankruptcy stays on your credit report for 7 years.
Don’t let this time scare you. The sooner you determine which path is right for you, the sooner you can start the clock and get back to your financial well being.
An Attorney can Provide You the Guidance You Need
We can answer all of the questions above and the countless others you may have. Do not settle for a one size fits all solution. We provide you with a bankruptcy protection path that is unique to your situation. Contact a bankruptcy attorney, like a Bankruptcy Law Firm Memphis, TN, today to get started.
Thank you to the experts at Darrell Castle & Associates for their input into bankruptcy law.