When it comes to filing for bankruptcy, you
face several options. Choosing the appropriate filing for your situation can seem difficult,
as it often depends on the consumer’s type of debt, income, and property. While we’ll
go over a few of the choices here, a local bankruptcy attorney can help you navigate
your bankruptcy, and provide counsel on the specifics of your case. To start with, there are two major types of
consumer bankruptcy to consider: Chapter 7 and Chapter 13. Chapter 7 bankruptcy is typically geared towards
consumers with low income and lots of unsecured debt, while Chapter 13 bankruptcy may be better
for those with regular income and non-exempt property. Let’s discuss these two options in a little
more detail, starting with Chapter 7. In Chapter 7 bankruptcy, debtors can have
most of their unsecured debts discharged. Unsecured debts are those that aren’t attached
to physical collateral, including credit card debt and medical bills. When a consumer’s
debts are discharged, they don’t have to pay them, they can’t be reported as delinquent
on credit reports, and anyone who tries to collect them can face bankruptcy court sanctions. In Chapter 7 bankruptcy, property can be liquidated
to pay some debts, but there are exemptions that cover most or all of the property that
most bankruptcy petitioners own. Most secured debts, like car loans and mortgages, must
be paid, or the property surrendered. There are several options for managing secured
debts: Reaffirmation, in which the debtor agrees
to keep paying off debts. Redemption, in which the debtor pays a flat amount and in turn
keeps the property. And surrender, in which the debtor returns the property, and the debt
becomes unsecured and often dischargeable. Most people who file for Chapter 7 bankruptcy
have a lot of unsecured debt and have little property of value. Chapter 13 bankruptcy, on the other hand,
is often filed by consumers who have more available income. Chapter 13 gives the debtor
time to catch up on past-due amounts, while maintaining current bills. Current bill payments
are based on the debtor’s current income. Chapter 13 bankruptcy prioritizes secured
debts, and can help save homes, automobiles, and other secured property. Unsecured debts
like credit card debt and medical bills can be paid after secured debts. If a debtor pays
off secured debts according to the Chapter 13 agreement, then most remaining unsecured
debts can be discharged. Chapter 7 and Chapter 13 bankruptcy meet different
needs for different consumers. To choose the right bankruptcy filing, consumers
need to take a close look at their debts, income and property. A local bankruptcy attorney
can help, by reviewing your specific financial circumstances, and advising you about which
bankruptcy protection might be best for you.