If you’re considering bankruptcy because of debt you can’t afford to repay, you probably have lots of questions about the process. Although everyone’s situation is different, these facts about bankruptcy law may help you decide whether it’s the right choice for you.
Types of Bankruptcy
Individuals typically qualify for one of two common types of bankruptcy filings:
- With Chapter 7 bankruptcy, eligible debts are discharged by the court. However, you may be required to sell certain assets to repay creditors.
- Chapter 13 bankruptcy is a restructuring in which you will pay a court-ordered amount toward your debt for three to five years, but can keep personal property. After the repayment period ends, the remaining debt is discharged.
Whether you qualify for Chapter 7 or Chapter 13 depends on your income, the amount of your debt and other factors.
When struggling with debt, most people are concerned about the effect bankruptcy will have on their credit. A Chapter 7 filing will remain on your credit report for 10 years, while a Chapter 13 filing remains for seven years. Although this can make it difficult to qualify for new loans, your credit is likely already damaged by past-due bills if you are considering bankruptcy. In many cases, you may be able to qualify for new credit in about three years after filing.
Although many debts can be discharged in bankruptcy, you cannot erase your student loan debt, alimony payments, child support payments, federal and state tax debt, and secured debt such as a mortgage. You can discharge credit card debt, medical bills, and other forms of unsecured debt.
Although you may be required to sell some assets if you file Chapter 7 bankruptcy, you can usually keep your home, car and other essentials if you are able to make loan payments as agreed. In Chapter 13 bankruptcy, your property is exempt and cannot be liquidated to repay creditors. A good bankruptcy attorney will review how these facets of bankruptcy law apply to your case. Those in the Ventura County area can contact the Law Offices of Brent D. George for a free consultation.