Fear of the unknown is one of the most difficult emotions to grapple with. When it comes to bankruptcy, most people are fearful because they don’t know what the future has in store. Let me be the first to tell you, everything is going to be ok. People are fearful of bankruptcy because of what they’ve heard from others. There’s a good chance, however, these people don’t know what they’re talking about. Bankruptcy is a great option for individuals who are overwhelmed with debt. If you’re tired of the overwhelming pressure debt has caused in your life, we can help.
Life Until this Point
Take a moment to reflect on the past six months, or more. What did your financial life look like? Since you’re reading this blog, the answer is probably “not great”. Have you continuously fallen behind on monthly payments? Maybe you’ve given up paying your bills altogether. Or, maybe, you’re still paying your bills, but you’re robbing Peter to pay Paul. If any of the aforementioned applies to you, this financial uncertainty can be incredibly overwhelming. Just because the last six months, or more, were overwhelming doesn’t mean the future has to be. Bankruptcy might be the perfect fix you’re looking for. Bankruptcy isn’t right for everyone, but it may be for you. Here’s what your bankruptcy options look like…
Bankruptcy Options
In the world of consumer bankruptcy, you have two options: Chapter 7 and Chapter 13. The decision between Chapter 7 and Chapter 13 depends on a number of things. I often get the question: “do I have enough debt to file bankruptcy?”. That’s a valid question, but a difficult one to answer. My rebuttal is, “if you don’t file bankruptcy, is there an option on the table for you to satisfy your liabilities within the next few years.” If traditional debt consolidation would help resolve your financial crisis, by all means go that route. However, if you don’t reasonably anticipate your financial posture to change in the next couple years, and you are barely making minimum payments now, bankruptcy might be a great option. Chapter 7 and Chapter 13 bankruptcy delivers the same results. However, there is a stark difference between the two. Here’s how the two consumer bankruptcy options compare and contrast…
Chapter 7
Chapter 7 bankruptcy is commonly referred to as the “liquidation bankruptcy”. Let’s be clear on something, though. It is not common for individuals who file bankruptcy to have their assets liquidated. Bankruptcy laws allow every person who files up-to a certain dollar amount of value in the items they own. Again, it is not common for individuals who file bankruptcy to have their assets liquidated.
After filing Chapter 7 bankruptcy, individuals begin to notice the benefits bankruptcy has to offer. Most notably, protection from creditors. Once the case is filed, creditors are no longer permitted to attempt collection on debts arising prior to the filing of the case.
The entire process is fairly quick. From start to finish, Chapter 7 bankruptcy generally takes four to six months. There are only three meetings prior to receiving your bankruptcy discharge; two with our office and one with a bankruptcy trustee (don’t worry, your attorney will be with you).
What makes this process even better is the fact we will do most of the work for you. There are some things that we will have to rely on you for, but most of the heavy lifting is handled by our firm. We will help you through the entire process and make sure you receive the protection you need from your creditors.
Chapter 13 bankruptcy varies in some aspects, but is also very similar in others. The main similarity is that a Chapter 13 provides protection from your creditors and also provides you with a discharge of your debts.
Chapter 13
Chapter 13 takes longer than a Chapter 7, but there is reason for that. Chapter 13 bankruptcy is commonly referred to as a “government sponsored debt consolidation plan”. Through a Chapter 13, you make monthly payments to pay off your debts over a three to five year period. This is similar to traditional debt consolidation. Chapter 13 repayment is based on what you can afford to pay, not what your creditors tell you to pay. Even if your budget only allows you to pay 10% of your total debt over five years, that’s all you will have to pay. The rest is discharged.
Your monthly payment is based on what your budget allows you to pay. We will work out your budget with you and help you determine what your monthly payment looks like. This is a thorough process, so we will be sure to guide you through it.
Most people file Chapter 13 for three reasons: either their income is too high, they have assets we can’t protect in a Chapter 7, or they need to get caught up on missed mortgage payments. This list is not exhaustive, of course, but these are just a few examples.
At the end of the three to five year repayment period, any amount of debt that is left unsatisfied is discharged, tax free, forever. So, Chapter 13 does provide the same relief as a Chapter 7, but the process is a little different.
Leave the Fear Behind You
Bankruptcy can be scary if you try to navigate the process alone. Even worse, if you listen to all of the naysayers, they’re just going to bring you down. If you’ve had it with overwhelming debt and you’re ready to move forward, feel free to give us a call. We will discuss your bankruptcy options with you in a relaxed environment and the first meeting is absolutely free. We’ll answer any questions you have. Once we get a chance to visit, we will provide you with our professional recommendation and help you get your life back!
