It can be confusing when you are preparing to file for bankruptcy. The laws are different depending on the type of bankruptcy you declare. While it may be tempting to do this on your own, you'll find that hiring an attorney that specializes in bankruptcy is very helpful. They will explain all of the confusing details to you so you understand what you are about to do. Here are some of the basics to get you started down the path of getting yourself a "clean slate" on which to rebuild your personal finances.
Chapter 7 Bankruptcy
This is considered the "personal" bankruptcy option for most individuals. If you're unable to pay your bills and facing a home foreclosure, this is the option for you. To file, you'll indicate all of your income and assets and list all of your creditors and how much you owe them. A chapter 7 bankruptcy attorney will guide you through this process and note which items must be included in the filing.
The filing just starts the process. A bankruptcy judge will review your information and assign a clerk to evaluate your assets. Should you have items that could be sold for cash, such as a vacation home, additional cars or a boat, the court will use the money from the sale and distribute it to your creditors.
At the end of the process, the judge signs an order discharging your bankruptcy. Your debts will be cleared so you won't owe anything on the accounts. Some debt is not affected by a chapter 7 bankruptcy, such as back taxes and educational loans.
You can file for a bankruptcy discharge again eight years after your recent discharge. If some of the debt left over after your chapter 7 bankruptcy filing becomes a hardship, you can file for chapter 13 bankruptcy. Along with the chapter 7 discharge, the chapter 13 filing can make your finances easier to manage.
Chapter 13 Bankruptcy
This type of bankruptcy gives you some protection from those items not addressed in your chapter 7 filing, such as taxes and student loans. With chapter 13, the court works with you and your creditors to establish a payment plan that works with your current income and expenses. In some cases, your attorney can negotiate with the creditors so you pay less than the total amount on the account. Frequently, charges such as interest and late fees are removed if you agree to repay the principal amount that you owe.
As soon as you have decided to file for bankruptcy, get an attorney involved. Your lawyer will explain how both chapter 7 and chapter 13 bankruptcy can benefit you and help you decide which is best for your current financial status.
For more information, contact an attorney who is experienced in bankruptcy law like Attorney John A McLaughlin Jr PC