Overwhelmed by debt? Struggling to cover the payments on your debt? Then, it may be time to consider bankruptcy. There are several different types of bankruptcy, and it's important to choose the right chapter for your particular situation. Here are signs that Chapter 7 bankruptcy may be the right answer for you.
1. You Have Wages or Assets You Want to Protect
In some cases, consumers are so insolvent that creditors wouldn't be able to take legal action against them. In particular, most creditors are not allowed to take your primary residence or your social security checks. If you only have a modest home and are living off social security, you may not need to file bankruptcy at all. It may be safe to just let your bills default. However, if you earn wages and have assets, bankruptcy can help you protect them.
2. You Are Ready to Liquidate.
With Chapter 7 bankruptcy, you are required to liquidate your non-essential assets. That generally includes your primary residence, your vehicle, and personal items such as clothing. The bankruptcy trustee requires you to sell all other assets and give the funds to your creditors. In most cases, people who file Chapter 7 end up having no essential assets that they need to sell, but if you choose this chapter, you should be aware of the possibility of liquidation.
To avoid liquidating assets, you may want to choose Chapter 13. That allows you to keep many assets, but it forces you to go on a repayment plan for three to five years.
3. You Don't Want to Go on a Repayment Plan
As indicated above, you have to go on a repayment plan with Chapter 13. If your debts are over a certain threshold, you have to file Chapter 11, and that also includes a repayment plan. Chapter 12, designed for fishers and farmers, also includes a repayment plan. Chapter 7 is one of the only options that doesn't require you to make repayments to your creditors.
The only repayments you need to make are on your mortgage or vehicle loan, but that only applies if you keep those assets and still have outstanding debt on them.
4. You Are Up to Date on Your Mortgage Payments.
As explained above, you get to keep your home in a Chapter 7 bankruptcy, and technically, you can file this type of bankruptcy even if you are behind on your mortgage payments. In fact, as soon as you file, the courts issue a stay, and the bank cannot foreclose on you. However, the stay is only temporary, and it's more or less up to the banks whether or not they want to work with you. If you can't catch up on your payments, the bank may ultimately foreclose.
With a Chapter 13 bankruptcy, in contrast, the repayment plan is set up so that you can catch up on your mortgage payments. With this type of bankruptcy, it's much more assured that you get to keep your home even if you are behind on your mortgage.
5. The Majority of Your Debt is Dischargeable
There are certain types of debt you cannot discharge in bankruptcy court. In particular, you can't eliminate student loans and child support debts. You can get rid of some tax debt, but there are stipulations, and if the tax debt is from the last three years, you usually can't include it in the bankruptcy. If most of your debt falls into these categories, you may want to explore other options.
If you are tired of collection agencies calling you constantly or you are exhausted from juggling credit card repayments and have tried other solutions, then, it may be time to consider bankruptcy. Contact the Jackson Law Firm to learn more today.