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Bankruptcy
Filing for bankruptcy protection is an option under certain circumstances; our attorneys can advise you on which chapter is best for your particular situation. For consumers, you have two options: Chapter 7 or Chapter 13.
Any time you file for bankruptcy, an automatic stay goes into effect that stops any lawsuits from proceeding against you or the continuing of any collection activities, including phone calls from creditors and lawsuits. A Chapter 7 is a liquidation proceeding. If you have substantial unsecured debt, such as credit cards or medical expenses, these can be discharged in a Chapter 7 while exempting most if not all of your personal assets from being seized by the bankruptcy trustee for distribution to your creditors.
We recommend Chapter 7 if other options for resolving your debt are unsatisfactory. You do have to qualify under a means test that we can assess for you. Essentially, your disposable income must be at or under the median income for your state, though we may be able to qualify you if you meet other conditions. Otherwise, you might be able to proceed under a Chapter 13.
A Chapter 13 is also referred to as a debt reorganization or repayment plan. Depending on the amount of your disposable income, you pay back your creditors over a 3- or 5-year period. This option is for debtors who do not qualify for a Chapter 7 or who may have assets that are not exempt, such as real estate other than your home or homestead. You do not lose or give up any assets while making a single payment to the trustee who distributes it among your creditors in order of their priority. This proceeding can save your home from foreclosure so long as you keep your monthly mortgage payments current while arrearages are paid over the life of the repayment period. You do need a steady source of income to qualify.
At the end of the 3- or 5-year repayment period, any creditor obligations not paid are discharged; this includes second mortgages on your home.
Talk to an attorney from Access Lawyers Group about financial management and what options are available to you if you are experiencing a fiscal crisis or have questions about how your finances can be more adequately maintained.