Dealing with financial problems as an individual or a business owner can be frustrating and overwhelming. If you feel like you’re drowning in debt and don’t have a way out, bankruptcy is the only solution for a fresh start.
Filing for bankruptcy refers to a legal process used by those who can no longer pay their creditors. It’s usually considered a lifeline since it allows you to release yourself from financial responsibilities and start fresh.
However, there are different types of bankruptcy to choose from, as stated in the United States Bankruptcy Code. Title 11 of the United States Code, or the United States Bankruptcy Code, defines the process that businesses must conduct when filing for bankruptcy.
According to this code, the two primary types can include Chapter 7 and Chapter 13. Essentially, Chapter 7 refers to a process of surrendering non-exempt assets to the court for liquidation and distributing the proceeds to the creditors. Meanwhile, Chapter 13 refers to a method of allowing people or entities to settle their debts over three to five years.
Given the difference, it’s essential to know which one is necessary to achieve a more desirable outcome. So read on to learn how to choose the right bankruptcy chapter for your situation.
Consult A Bankruptcy Lawyer
Unless you’re an expert on bankruptcy laws in your state, it’s crucial to work with a dedicated lawyer to help you. Navigating bankruptcy can be a complicated undertaking, especially if you have no idea how or where to start. But, with the assistance of a legal professional, you can figure out which type of bankruptcy is appropriate for your situation.
For instance, an experienced bankruptcy lawyer from law firms like Steele Law Firm in Fort Worth or wherever you may be located can help you in the following ways:
- Gather and analyze all your financial information to offer valuable legal advice.
- Assist you in exploring the available options and determining which one is best for you and your family or business.
- Explain the advantages and disadvantages of the different types of bankruptcy chapters to pick the right one.
- Understand the intricacies of bankruptcy laws in your state, so they can help safeguard your financial interests throughout the process.
So, if you want to ensure a more positive outcome for your financial situation, it’s best to consult a legal professional to guide you through the proceeding. With them by your side, you can have peace of mind knowing they can help you resolve your debts and get a fresh start.
Check Your Income
Another consideration to take when selecting the right bankruptcy chapter for your financial situation is your income. Since the various types of bankruptcy work in different ways, it’s essential to look at your current income.
For example, if you have a significant income but several debts make life difficult for you and your family, filing for Chapter 13 might be an excellent option. This allows you to pay off your debts over a certain period until you get back on your feet.
However, if you have more debts than income or no income, seeking relief from Chapter 7 might be your best option. You allow the bankruptcy court to liquidate your assets and settle your debts with creditors through the proceeds.
But you should know that Chapter 7 has income limits. So make sure you qualify based on that requirement to avail yourself of Chapter 7. Otherwise, your situation will be best handled by Chapter 13.
Consider Other Essential Factors
Aside from the income, choosing the right bankruptcy chapter might depend on essential factors that affect your situation. These can include:
It’s also vital to factor in your goals when picking the proper bankruptcy chapter for your needs. For instance, if you have a house to save from being foreclosed on or debts that can’t be dismissed, such as taxes, filing for a Chapter 13 bankruptcy might be your best option.
However, if your only goal is to get out of debt, it’s best to use Chapter 7 bankruptcy to address your problem.
- Kind of Debts
You should also consider the nature of your debts when filing for bankruptcy. Some debts can’t be discharged in Chapter 7.
A typical example is those non-support debts associated with divorce. So, if most of your debts can’t be discharged in Chapter 7, the other type of bankruptcy might be your best option.
When you choose Chapter 7, an appointee will be assigned to collect and reduce the non-exempt assets or those that can be sold by someone else. When you file for Chapter 13, you remain in possession of your assets and make payments into the plan of a certain amount.
Hence, if you want someone to help you get out of your debts, a Chapter 7 filing might suit your situation. However, if you wish to retain possession of your assets while paying off your debts, Chapter 13 might be the appropriate solution.
Seeking bankruptcy protection to improve your financial situation can be a significant decision. However, there are many things to consider to ensure a favorable outcome.
Therefore, if you want to get the most out of your decision to file bankruptcy, keep the information mentioned above in mind. Find time to familiarize yourself with the different types of bankruptcy chapters and pick the one that fits your financial situation.