| You may feel you don't have any other options. | | | | debts. |
| Maybe you owe several people money, your credit is | | | | - Meet the debt limit. The limit varies but the most debt |
| maxed out, and you are falling deeper into debt so you | | | | you can have for a Chapter 13 bankruptcy is typically |
| start to explore filing for bankruptcy. You thought you | | | | around $1 million. Unsecured debts have to be under an |
| never would, but you've heard about it, maybe even | | | | amount around $300,000 and secured debts should be |
| someone you know has done it and the question you | | | | under around $700,000. |
| want to know is when should you? All types of | | | | - Are not filing for a corporation or partnership. |
| bankruptcies exist: chapters for businesses, individuals, | | | | - Want co-signors to be immune from collection |
| even a chapter for farmers and fishermen. | | | | efforts if the plan is a full payment one. |
| First understand that two main types of bankruptcy | | | | Now that you know the types of bankruptcy filings |
| exist for individuals: | | | | that exist, and have an idea of what type of |
| - Chapter 7 is a straight or liquidation bankruptcy, | | | | bankruptcy might be best for you, don't stop there. |
| meaning the debtor's nonexempt property is sold to | | | | Most likely, there are other questions that you need |
| pay creditors. Because of the means test, this type of | | | | answered. Below are a few of the most common: |
| bankruptcy is more difficult to file. | | | | - What effect will bankruptcy have on my credit? |
| - Chapter 13 is a repayment plan for individuals, usually | | | | Your credit history may already be poor but keep in |
| allowing them 3 to 5 years to pay off their debt. | | | | mind that a bankruptcy will remain on your credit for up |
| Chapter 7 bankruptcy accounts for almost two-thirds | | | | to 10 years. Of course, credit can be re-established. |
| of all bankruptcy filings. For those wanting a fresh start | | | | - Will my coworkers, neighbors, and friends know that I |
| faster, Chapter 7 bankruptcy may be the bankruptcy | | | | have filed for bankruptcy? Though employers and |
| to go with over Chapter 13. The case is often over in | | | | landlords will not be sent notices or otherwise directly |
| less than 6 months and no minimum debt is required. | | | | informed about your bankruptcy, anyone can find out |
| Additionally, with Chapter 7, debtors can sign a | | | | that you filed because bankruptcy is a public record. If |
| "Reaffirmation Agreement" where they can keep | | | | a potential employer does a credit check, bankruptcy |
| certain assets like a car or house while continuing to | | | | filings will show up on that report, which can seem like |
| pay a loan or mortgage. A negative of Chapter 7 | | | | bad credit is on your record even years after the |
| bankruptcy, however, is that co-signors of a loan can | | | | bankruptcy was filed. |
| be stuck with your debt unless they also file for | | | | - Will bankruptcy prevent me from having my wages |
| bankruptcy. | | | | garnished? Both Chapter 7 and Chapter 13 grants |
| File Chapter 7 bankruptcy if you: | | | | protection against wage garnishment and creditor |
| - Have completed mandatory credit counseling. | | | | collection. |
| - Are ready to sell nonexempt property and distribute | | | | - What does bankruptcy cover? |
| the proceeds to your creditors. | | | | - Credit card debts |
| - Have property left over so that when you are | | | | - Medical bills |
| finished selling the property to pay off your debt, you | | | | - Unsecured loans |
| will be able to start over again financially. | | | | - What types of debts are not erased with |
| Chapter 13 may be a more suitable choice if you have | | | | bankruptcy? |
| valuable property you want to keep or have too much | | | | - Student loans |
| income to file a Chapter 7 bankruptcy. With Chapter | | | | - Alimony and support |
| 13, debts can be reduced and you have more time to | | | | - Debts from fraud |
| pay off the debts that can't be discharged from either | | | | - Drunk driving compensation |
| type of bankruptcy. This type of bankruptcy allows | | | | - Tax bills |
| you to separate creditors where they receive different | | | | Contact the organizations affiliated with these types of |
| percentages of payment so debts with a co-debtor | | | | debts to work with them directly. |
| can be treated differently than debts on your own. | | | | Under certain circumstances, income taxes may be |
| Disadvantages to a Chapter 13 bankruptcy include | | | | discharged in bankruptcy. Usually taxes must be at |
| having to use post bankruptcy income to pay off | | | | least 3 years, assessed at least 240 days prior to |
| debts, incurring higher legal fees because filing Chapter | | | | bankruptcy filing, and filed voluntarily at least 2 years |
| 13 is more complex, not being able to file if you are a | | | | ago. Consult a tax professional regarding details. With |
| stock or commodity broker, and needing to be involved | | | | Chapter 13 bankruptcy, payment plans can often be |
| in the bankruptcy court process for as long as it takes | | | | worked out for taxes. |
| you to pay off your debts (3 to 5 years). | | | | Other options exist to help with financial difficulties. |
| File Chapter 13 bankruptcy if you: | | | | Contact a qualified tax professional to discuss your |
| - Have completed mandatory credit counseling. | | | | situation. |
| - Have a regular income but need time to pay off | | | | |