What Are The Different Types Of Bankruptcies Available To Me?

hat type of bankruptcy is chapter 7

What Are The Different Types Of Bankruptcies Available To Me?

hat type of bankruptcy is chapter 7

So, you noticed that you are struggling to pay your bills every month and wonder if bankruptcy is the right choice? When you run into financial problems in Missouri, you typically have several options. You can look to file a Chapter 7 bankruptcy, a Chapter 13 bankruptcy, or even a Chapter 11 bankruptcy.

However, filing for bankruptcy is something you will want to take very seriously. Bankruptcy can be life-changing because it can enable you to get a fresh financial start.

Before you even think about filing for bankruptcy, there are many things to consider. Knowing which bankruptcy is best for you and who to turn to for legal advice are the keys to filing successfully. Here are commonly asked questions regarding bankruptcies.

Answers To 5 Questions About Bankruptcy

 

Question #1. What Is the Concept of Bankruptcy?

 

Bankruptcy is a legal process in the United States for resolving debts between the debtor and his or her creditors.

Bankruptcies are now entirely voluntary. When there is no possibility of repaying medical expenses, credit card balances, or other overwhelming debt, a person chooses to file for bankruptcy. Debtors have the following legal safeguards when filing for bankruptcy:

  • Creditors are not permitted to sue the debtor.
  • Collection agencies must cease all communication with the debtor.
  • Foreclosure or eviction procedures are frequently put on hold.
  • Wages of the debtor cannot be garnished.
  • The debtor’s utilities cannot be turned off.

A bankruptcy court evaluates the best way to pay creditors during bankruptcy procedures without depriving the debtor of fundamental requirements. Finally, any outstanding obligation is cancelled.

Question #2. How Do I Evaluate Whether I Should File for Bankruptcy?

 

Here are some questions to tell you exactly your financial risk level:

  • Do you merely make minimal credit card payments?
  • Are you getting phone calls from debt collectors?
  • Do you feel afraid or out of control when you think about organizing your finances?
  • Do you pay for needs with credit cards?
  • Do you want to consolidate your debts?
  • Are you aware of how much money you owe?

If you responded yes to two or more of the points above, you should think about your financial position more carefully. In a nutshell, bankruptcy occurs when you owe so much more than you can manage to pay.

People might find themselves in this circumstance for a variety of reasons. You may have lost your work or had your income decreased due to the COVID-19 epidemic, which is only one example.

In other circumstances, sudden expenditures, such as medical bills, may drive anyone over the limit financially. Bankruptcy does offer certain advantages, such as potentially stopping wage garnishments or foreclosures.

Question #3. Types of Bankruptcies: Which Is Right For You?

 

There are officially six categories of bankruptcy, each named after a chapter of federal bankruptcy law. However, for most individuals, the options are limited to Chapter 7 or Chapter 13.

Question #4. What type of bankruptcy is chapter 7?

 

Because it is straightforward and quick, Chapter 7 is referred to as “straight” bankruptcy. 

Except for those exempt assets, all of the debtor’s assets are liquidated, and the revenues are split among the creditors. 

In the bankruptcy laws, Chapter 7 is titled liquidation. The irony is that most Chapter 7 applicants have no genuine assets to dispose of, at least none that aren’t exempt. 

To be eligible for Bankruptcy Chapter 7, you must generate less than your state’s median income, preferably significantly less. 

If your income is excessive, your creditors may argue that you can afford to repay the loan in installments, leading to Chapter 13.

When Can You File for Chapter 7 Bankruptcy?

 

There are several signs that you should apply for Chapter 7 bankruptcy. The five major clues that filing for Chapter 7 may be the best option are as follows:

  • Your responsibilities surpass 50% of your annual income.
  • Even if you worked hard, it would take you five years (or more) to pay off your debt.
  • Your debt strains important aspects of your life, such as your relationships and your ability to sleep.
  • You have little to no extra money.
  • Your monthly earnings are lower than the state’s median.

Question #5. What type of bankruptcy is Chapter 13? 

A person who does not meet the means test for Chapter 7 may be eligible for Chapter 13. Generally, Chapter 13 bankruptcy works for persons who have a consistent income and can make certain debt payments but do not have enough money to pay off all of their obligations as they are now structured.

The person presents to the court a repayment plan. A bankruptcy court Trustee must approve this arrangement. The Trustee is also usually in charge of making plan payments; thus, the individual pays the Trustee. The Trustee’s office then makes payments to various debtors.

Typically, a Chapter 13 bankruptcy merely pays off a portion of your obligations. Priority and secured bills are fully paid, such as taxes and car loans. Unsecured, non-priority obligations, such as medical expenses and credit card debt, on the other hand, are only partially paid. 

If you complete your Chapter 13 repayment plan, the outstanding debts are discharged at the end of the repayment period. It might take three to five years.

Do you meet the requirements for Chapter 13 bankruptcy?

 

To be eligible for Chapter 13 bankruptcy, you must first:

  • You must have a consistent source of revenue.
  • Your unsecured debt can’t be more than $419,275, and your secured debt can’t be more than $1,257,850.
  • You must keep up with your tax filings.
  • You must not have applied for Chapter 13 bankruptcy in the previous two years or Chapter 7 bankruptcy in the previous four years.
  • You must not have already filed a bankruptcy petition. (Chapter 7 or 13) during the preceding 180 days that was rejected for specific reasons, such as failing to appear in court or comply with court requirements.

Even if you qualify for Chapter 13, be sure you understand the distinction between Chapter 7 and Chapter 13 bankruptcy.

Related Topic: Is Chapter 13 or Chapter 7 Better?

How Do You Assess Which Bankruptcy Type Is Best For You?

This is a complicated private or business finance topic. Bankruptcy should always be the final resort, but it is an option that should always be available to you. There are different types of bankruptcy available, and each type has its advantages and disadvantages. If you consider filing for bankruptcy, you will want to speak with a Missouri bankruptcy lawyer.

A Missouri bankruptcy lawyer can provide you with information to help you assess which type of bankruptcy is best for your particular situation. They will also help you decide whether or not filing for bankruptcy is worth it.

Making the choice

I hope this post has simplified the different types of bankruptcy and how they can help you overcome your financial problems. Bankruptcy could help you eliminate your debts. Generally, you choose to petition for bankruptcy under Chapter 7 or Chapter 13. 

A Chapter 7 may remove most of your debts or a portion thereof if certain conditions are met; whereas, a Chapter 13 wipes out some of your debts and establishes an affordable payment plan for the ones that remain. If you are considering bankruptcy, please speak with a bankruptcy lawyer from Doyel Law Firm, who can discuss these options with you in more detail and determine which one is right for your situation.

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