When you consider filing for bankruptcy, it’s important to know everything that’s involved with the process. Your bankruptcy attorney can help guide you through the process, but first, he or she wants to ensure you know these five things.
There Are Different Forms Of Bankruptcy
First and foremost, you need to determine what type of bankruptcy you will pursue. Chapter 7 and Chapter 13 are the most common types for individuals.
Most people may opt for Chapter 7 because it is quicker to complete, and it will erase most of your unsecured debts. However, this form may require you to liquidate your assets to pay back some of your debts. Because of that, this type of bankruptcy can be best if you have little to no assets. You must also prove your income is low enough to file for Chapter 7. If your income is too high, you must then file for Chapter 13 bankruptcy.
Chapter 13 bankruptcy is for people who have a regular income and who can afford to repay their debts through a repayment plan. Under this type of bankruptcy, you can typically keep your property, but you need to repay your creditors through a court-approved repayment plan.
Don’t Rack Up New Debt
When you know you’re going to file for bankruptcy and will have a lot of your debt erased, it can be tempting to go on a spending spree and create a lot of new debt. This is not a good idea. You should not accrue new debt within the 70- to 90-day period before filing for bankruptcy, especially if you know you will be filing bankruptcy. If you do this, your creditors could refuse to discharge that portion of your debt.
Other actions you want to avoid include transferring assets out of your name and to a friend or relative before filing bankruptcy. Note: If you’ve done this, you should not file your case, either on your own or through my or any other attorney, without disclosing this to the attorney and being advised of what could happen.
You also should avoid transferring money out of your retirement fund. These accounts are typically protected during bankruptcy, so there is no need to hide or remove money.
Bankruptcy Won’t Necessarily Eliminate All Of Your Debts
While filing for bankruptcy can eliminate a lot of your debts, it won’t wipe out all of them. Certain debts cannot be erased. These can include spousal support, child support, and back taxes.
Bankruptcy Can Take Time
It’s essential to understand that bankruptcy proceedings can take time. Chapter 7 is a quicker bankruptcy, but it can take several months to complete. Chapter 13 bankruptcy can take much longer. After getting a repayment plan approved, it will typically take you 3 to 5 years to pay off.
You Likely Won’t Lose All Of Your Property
If you’re afraid to file for bankruptcy because you think you will lose all of your property, this is typically not the case. You can keep a certain amount of exempt property when you file bankruptcy. This can include the equity in your home, car, equipment needed for your job, and other necessities. If you file for Chapter 7 bankruptcy, you may need to sell off all non-exempt property to repay your debt. It’s important to work with your bankruptcy attorney to determine what property you can list as exempt, and what must be classified as non-exempt.
Let Us Help You
If you’re considering filing for bankruptcy, let our lawyers at The Law Offices of Alexzander C.J. Adams, P.C. help. We work for you, the people, and not institutions. Contact us for a free case evaluation, or no-obligation consultation. We are dedicated to helping you overcome this small bump in the road and assisting you to get on with your life.