02/28/2022
3 Common Questions About Bankruptcy
Bankruptcy is a practical solution to unmanageable debt, offering consumers a way to reclaim their financial freedom. But many people considering bankruptcy find that they are unclear about what the process entails and have a lot of questions about what is involved in filing. Below are answers to three of the most common questions about bankruptcy.
1. WHAT ARE THE DIFFERENT TYPES OF BANKRUPTCY?
There are two main types of bankruptcy available to people. Chapter 7 bankruptcy eliminates most unsecured debts, giving the filer a clean financial slate. Chapter 13 bankruptcy restructures existing debt into a budget plan according to your ability to pay. Chapter 13 is also best used for getting caught up on mortgages and other secured debt.
2. WHAT KINDS OF DEBT CAN BE DISCHARGED IN BANKRUPTCY?
The overwhelming burden of credit card debt, medical bills, past-due utilities, and late rental payments may all be eligible for discharge. You can also discharge secured debt, like car loans and mortgages, if you are willing to give up the property that secures the loans. More likely, you would use a Chapter 13 budget plan to catch up on those bills and keep the property. It is important to understand that some debts — namely student loans, child support, and certain types of taxes — are not dischargeable.
3. HOW MUCH DEBT SHOULD I HAVE IN ORDER TO CONSIDER BANKRUPTCY?
While there is no hard and fast rule about how much debt you must have when filing for bankruptcy, the process should not be your first line of defense against mounting money woes. In general, most filers have at least $15,000 or $20,000 in debt. Remember: bankruptcy impacts your credit, so be sure the benefit of filing outweighs any potential drawbacks.
Of course, much of this is an over-simplification and your specific situation is yours alone. It is always important to consult with an experienced attorney who is knowledgeable in the areas of debt, credit and bankruptcy to decide if the process can solve your financial troubles.
