Bankruptcy feels like a scary subject. The very word suggests to some people a stigma, a sense that one’s life will be permanently damaged in some way. But this is simply not true. Bankruptcy is a remedy provided under federal law to ensure that debtors are able to climb out of a financial hole and restart their lives. Sometimes, due to medical bills or a sudden downturn in the economy, a family can find themselves struggling to make payments. In that case, bankruptcy might be the right solution.
There are several types of bankruptcy. A Chapter 7 bankruptcy—also known as liquidation—will relieve the debtor of all “unsecured” debts, that is, those debts that are not secured by collateral, such as a house or car. In Chapter 7, there are some debts that cannot be discharged at all. These include back-taxes and criminal fines.
A Chapter 13 bankruptcy is a reorganization of your debts. Typically, a person files this to save real property such as their home or their vehicle. Filing under this chapter puts an immediate stop to both a foreclosure or a repossession of your vehicle. If you go this route, you will be able to resume your monthly payments on your property. You will also be required to make monthly payments to the Chapter 13 Trustee in order to catch up on all other debts you may have accumulated.
There are many factors that determine whether bankruptcy is right for you, and if it is, under which chapter to file. If you have any questions regarding bankruptcy, please contact our office and set up an appointment with one of our attorneys so that they may better advise you on your rights under federal law.