Filing for bankruptcy is a serious matter. Thousands of individuals choose bankruptcy as an affordable debt relief option each year. However, many do not understand what does bankruptcy do or whether or not it is right for them. As a professional struggling financially, you may be considering filing for bankruptcy. Before doing so, you need to decide if it is the right choice for you or not. Read this post to learn how to decide if bankruptcy is right for you.
Consider All Debt Relief Options
Before you decide to file a bankruptcy case, you need to consider alternatives to bankruptcy. Alternatives to bankruptcy may include debt consolidation and debt negotiation. However, each debt relief option has pros and cons. Discussing the pros and cons of various debt relief options with a NJ bankruptcy lawyer is strongly encouraged. Complete this step before deciding which option is best for you.
Determine If You Qualify
Are you familiar with the various chapters of bankruptcy and whether you qualify to file for each of the types of bankruptcy? Individuals typically file under Chapter 7 or Chapter 13 of the Bankruptcy Code. Many Chapter 7 cases are completed in four to six months after filing a bankruptcy petition. However, Chapter 7 has income restrictions (Means Test), and some individuals lose property in Chapter 7. A Chapter 13 case is a repayment plan that allows you to spread out debt payments over a 36 to 60-month bankruptcy plan. Chapter 13 can protect a debtor’s home, vehicle, and other assets.
Fortunately, there are plenty of professionals to turn to if you are confused about the different types of bankruptcy. For example, Scura Attorneys at Law advises clients to consider several questions about their financial situation before they decide whether to file for bankruptcy relief. In most cases, discussing these questions with an experienced bankruptcy lawyer can help you choose a great option. You can find the perfect option that enables you to get out of debt without losing your property.
Understand What Happens To Property
Additionally, you need to understand what happens to property. You need to consider the different outcomes that occur between Chapter 7 vs. Chapter 13 bankruptcies. Filing a Chapter 7 or Chapter 13 bankruptcy case does not relieve your obligation to pay secured debts, such as mortgages and car loans. If a creditor has a lien on property, you must continue to pay that creditor or surrender the property. However, filing a bankruptcy case can make it easier to pay secured debts. For example, filing a Chapter 13 case may result in lower car payments. If you are behind on your mortgage payments, you can stop foreclosure by filing a Chapter 13 case and spreading out the past due payments over several years. A Chapter 7 case does not give you the same options for repaying past due mortgage payments or car loans over time.
In a Chapter 7 case, you could lose various pieces of property. If you have substantial equity in the property that is not protected by bankruptcy exemptions, this is likely. Before filing for bankruptcy relief, hire a New Jersey bankruptcy attorney to review your specific financial situation. They can determine if any property might be at risk if you file a Chapter 7 bankruptcy case.
Discover Which Debts Are Dischargeable
Most general unsecured debts are dischargeable in bankruptcy, including credit cards, personal loans, most judgment debts, and medical bills. There are some exceptions related to debts incurred recently, fraud, and debts incurred for luxury items. Even though most tax debt is not eligible for a discharge in bankruptcy, some old tax debt could be wiped away.
Student loans, child support, spousal support, restitution, and most debts owed to government agencies are not dischargeable in a bankruptcy case. You may be able to pay these debts in full through a Chapter 13 repayment plan over time instead of in one lump sum.
Inquire About Retirement Account Safety
Most retirement accounts, including IRAs, 401k plans, and workplace pension plans are protected by bankruptcy exemptions. Social Security is also protected in bankruptcy. Because there are always a few exceptions, it is best to consult with a bankruptcy attorney before filing a bankruptcy petition to ensure your retirement funds cannot be used to pay debts when you file a bankruptcy case.
Talk To Your Co-Signers
When you cosign a debt, you agree to be legally liable for the debt if the other party defaults on the loan payments. Therefore, if a relative, friend, business associate, or other party cosigned any of your debts, that person can be held legally liable if you do not pay the debt.
Think About Your Personal Life
Filing a bankruptcy requires you to disclose all the details of your finances to the court. The information is a matter of public record. However, most people will never be aware that you filed for bankruptcy relief. It also requires time and commitment to gathering information and documentation.
However, working with a legal team at a New Jersey bankruptcy law firm can make the process of filing bankruptcy less stressful and easier. An attorney carefully analyzes your financial situation, discusses debt relief options, explains the pros and cons of bankruptcy, and handles all aspects of completing your bankruptcy forms and filing those forms with the court.
Filing bankruptcy can give you a fresh start, free from the burden of debts that you cannot pay. A bankruptcy filing can protect your property from creditors and allow you to recover from a financial crisis. For many people, filing a Chapter 7 or Chapter 13 bankruptcy case gives them the ability to rebuild their finances, improve their credit rating, and move forward without the stress and anxiety caused by debt problems.