Bankruptcy cases raise several questions for struggling individuals, and often the answers are less than straightforward. Filing for bankruptcy can be a process rife with anxiety and uncertainty. Hearing a few of your questions answered can help demystify the process and ease your nerves. Here are the answers to a few bankruptcy questions that might be weighing on your thoughts.
Should I file for Chapter 7 or Chapter 13 Bankruptcy?
You qualify for Chapter 7 if your circumstances are as follows:
- Your monthly expenses exceed your income
- Your income is below the median family income in your state
- You don’t have a lot of assets you plan to keep
Under Chapter 7, some (not all) of your debts may be eliminated with a discharge. If you file under Chapter 7, you may have to liquidate your assets, such as property, in exchange for having eligible debts settled.
Chapter 13 allows you to keep your assets but requires you to repay your outstanding debts within sixty months. This type of bankruptcy is best for people who can pay back their debts but need a reorganization plan.
Bankruptcy law is complicated. Regardless of the type of bankruptcy that best suits your immediate needs, it’s essential to partner with a bankruptcy lawyer for the following reasons:
- Lawyers help you prepare for bankruptcy, especially the paperwork involved.
- An experienced attorney is best suited to represent you during the case.
- Lawyers help address residual, financial, and legal issues.
- A bankruptcy attorney will also give you post-bankruptcy guidance, especially on how to rebuild your credit responsibly and successfully.
Partnering with an experienced professional is the best way to ensure you receive the fairest bankruptcy outcome possible.
Does filing for bankruptcy ruin my credit?
No. Although filing for bankruptcy will affect your credit, it only remains at the new score for a certain period, depending on the bankruptcy chapter you file.
If you file for a Chapter 7 Bankruptcy, it stays on your credit for ten years. For a Chapter 13 Bankruptcy, it remains for seven years.
Will my spouse also have to file for bankruptcy?
Not necessarily. If the debts are only in your name, it can be that only you file for bankruptcy, and vice versa.
Nevertheless, your spouse (the non-filing partner) must provide their proof of income. The only exception is where you’re apart and living under separate households.
In some situations, it’s better if you both file for bankruptcy. Doing so is crucial if both spouses want to benefit from bankruptcy fully, discharging off their debts.
Will I lose my property?
You may lose your property. While the court will protect most of your property from sale, the law provides special exemptions.
That means if you have a valuable asset you want to keep, but the exemptions don’t cover it, you cannot keep it unless you file for Chapter 13 bankruptcy. This chapter protects you from losing any property as long as you complete your reorganization plan.
Where do I file bankruptcy?
You can only file bankruptcy in a district court. Of course, your district depends on where you live.
Remember, a bankruptcy filing is a federal procedure, meaning you cannot file your case in a state court (county court).
Does it mean I’ll never qualify for a mortgage again?
No. Many people qualify for loans post-bankruptcy and purchase homes. How fast you are eligible for a loan and buy a new home is up to the lender’s discretion.
Parting shot
Bankruptcy can sound frightening, but it might be necessary to file to reorganize your finances and move forward without accumulating more and more debts. Just ensure you walk the journey with a professional bankruptcy attorney to assist you in every step and advise you on the options available.