Life is unpredictable. Sometimes crises arise without warning, such as an illness, accident, job loss or divorce. When this happens, you may find yourself crushed under mounting debt. While you may see your financial future slip farther away with each unpaid bill, you do still have some options. Filing for bankruptcy can not only help you discharge your debt, but it can also provide protection from creditors, which can give you time to figure out your next step. With the help of a skilled Schaumburg bankruptcy attorney, you can effectively file for bankruptcy and achieve a fresh financial start.
How Will Bankruptcy Help Me?
The legal process of bankruptcy allows individuals to either reorganize or discharge debt that they otherwise could not afford. In addition, filing for bankruptcy can lead to these other benefits:
- Halting actions of foreclosure
- Fending off creditor harassment
- Preventing wage garnishment
- Discharging debt (with Chapter 7)
- Reorganizing debt (with Chapter 13)
If you feel your current situation could benefit from filing for bankruptcy, then it’s time to decide which type you should file under.
How Chapter 7 Bankruptcy Works
Easily the quickest type of bankruptcy, filing for Chapter 7 awards individuals with the chance of eliminating debt by selling off non-exempt property and assets. After selling those assets, any proceeds are then handed over to creditors. Since this type of bankruptcy usually only lasts between four to six months, it’s easy to see why it’s also the most common form.
Ready to file for Chapter 7? First, you will need to take the Means Test to see if you qualify. Essentially, this test examines your income to debt ratio in an effort to determine if you have enough disposable income to repay those debts. If you do not, then you will more than likely qualify for Chapter 7. However, if you do receive enough disposable income, then you may want to move on to filing under Chapter 13 bankruptcy instead.
How Chapter 13 Bankruptcy Works
Failed to qualify for Chapter 7? Or, do you own a lot of non-exempt property that you wish to keep? Then filing under Chapter 13 bankruptcy may be your best bet.
Not nearly as quick as Chapter 7, filing under Chapter 13 awards individuals with the ability to restructure their debt into an affordable monthly plan. Typically, this repayment plan will last between three to five years in total. On the date of your plan’s expiration, any remaining debt that you owe is then discharged.
Ready to file for Chapter 13? Fortunately, out of the two bankruptcies, Chapter 13 is the easiest to qualify under. All it simply requires is to receive a steady income that is enough to meet your plan’s monthly payments. However, if you do fail to meet those payments, then the court will require you to return in order to formulate a different debt relief strategy.
Is Bankruptcy My Best Option?
We’ve talked about the benefits behind filing for bankruptcy; however, we should now talk about the negative aspects as well.
Bankruptcy Does Not Eliminate All Types of Debt
That’s right. Unfortunately, bankruptcy cannot eliminate nondischargeable debt. This type of debt includes student loans, child support, alimony, criminal fines, and taxes. So, if most of your debt contains any of those above, then filing for bankruptcy will not help you. Keep in mind that bankruptcy will only eliminate dischargeable debt, such as personal loans, medical bills, and credit card debt.
Filing for Bankruptcy Will Negatively Impact Your Credit Score
This is one of the biggest negative aspects about filing for bankruptcy. Your credit score will take a hit once you file. So, if you plan on either buying a house or borrowing money in the future, then you may want to steer clear of bankruptcy. In addition, you should know that filing under Chapter 7 will stay on your credit report for ten years, while Chapter 13 will remain for seven.
How Can Bankruptcy Protect My Home?
After you file your bankruptcy paperwork in court, the administrative law judge will issue an “automatic stay” over your assets. Essentially, this stay prevents any of your creditors from collecting on those assets — this even includes your home. So, if you are facing foreclosure, and if you then file for bankruptcy, then you home will be temporarily protected. Yes, only temporarily though. You will need to complete the entire bankruptcy process or repay your debt in order to permanently protect it.
Get Help from a Schaumburg Bankruptcy Attorney
With each unpaid bill, your debt mounts higher and higher. When your financial future seems in danger, filing for bankruptcy may be your way out. Here at Lorraine M. Greenberg & Associates, our skilled Schaumburg bankruptcy attorney will craft the best debt relief strategy for your situation. Contact us today to get the help that you need.