When you are facing a bankruptcy, your stress level is already very high. You probably have many concerns about whether you can keep your home or your car. You might be concerned about your business and how your bankruptcy will affect your job. These are all valid concerns that will need to be addressed. A bankruptcy is designed to help you get a fresh start when you are choked by bills, but whether a bankruptcy will fix your situation depends on a number of factors. You may want to look at alternatives to filing Chapter 7 bankruptcy.
Chapter 7 or 13?
Chapter 7 is the bankruptcy filing in which most of your debts are discharged. Filing Chapter 13 “reorganizes” your debts, and you work with a bankruptcy trustee and the court to pay off your debts. You have to look at what kind of debt you have, how much income you make and the limits under each bankruptcy type to determine which one fits your needs. Generally, with a Chapter 13, you can keep your home out of foreclosure while you get caught up on payments. With a Chapter 7, you might be able to keep your home, but you do have to continue making payments.
These are some debts that cannot be discharged under a Chapter 7 filing:
- Child support or alimony
- Some tax bills
- Fines and penalties you owe for breaking the law
- Debts that you owe for an injury or death due to a DUI
Student loans and income tax debt are difficult to discharge. Generally, you should expect to keep those debts following your bankruptcy, but each case is different. Your creditors can object to a debt being discharged if it is demonstrated that you willfully abused a credit card or committed fraud.
Consider talking to your creditors
Because a bankruptcy affects your credit for many years, you might want to talk to your creditors or work with a debt counseling service before filing bankruptcy. Make sure that the service you use is legitimate. A non-profit is generally a better choice, but there are profit services that do a good job. Always read through the agreement before signing anything.
Bankruptcy should not be entered into lightly. You need the facts to make good decisions about your situation. The process is long and can be quite stressful, but through understanding, you can eliminate part of the anxiety and find the best outcome. Talk to an attorney about your bankruptcy to make sure you have explored all your options.