Choosing Between Food and Credit Card Debt? Know Your Bankruptcy Options

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Times are tough and many people should consider bankruptcy help. Between rising fuel costs and inflating prices at grocery stores, it can be harder and harder to make ends meet. This can leave you in a difficult position at the end of the month when you start to pay your bills. If you’re choosing between what bills to pay – or if you’re stuck deciding between paying your credit card bill or getting food for your family — it’s time to get help and learn about bankruptcy.

If You Are Here, You Have to Make a Change

If this describes your financial situation, then it’s time to make some changes and consult a bankruptcy attorney.

Working with a bankruptcy attorney, you can determine if bankruptcy makes sense as an option to resolve your financial situation as well as which is the best form of bankruptcy to pursue.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy involves liquidating your assets and using the money to pay down the debt you owe. This is often a misnomer, however. In the vast majority of Chapter 7 cases, the law allows you to keep all the assets you have. You will need to show you cannot afford to pay back your debts to qualify for Chapter 7 under the bankruptcy code’s “means test.” This can include providing statements showing your income, assets, debts, and other financial records.

This type of bankruptcy can eliminate your unsecured debt. This can include credit card debt and medical bills. Some debts cannot be discharged. This can include child support, tax debts, and student loans.

You can also protect property that’s marked “exempt” from being liquidated. This typically includes items that are necessary to live and work – like your home or equipment you need for your job.

Chapter 13 Bankruptcy

Chapter 13 is another popular option for individuals who are pursuing bankruptcy. Unlike in Chapter 7 bankruptcy, where you may liquidate your assets to pay off your debt, with Chapter 13 you create a repayment plan for creditors. This allows you to pay off your debt over the 3 to 5 years of the plan. In almost all Chapter 13 cases, you pay a ‘pro rata’ amount of the debt, and the rest of the debt is eliminated by court order. Pro rata means some portion of the debt – which can be as low as a single-digit percentage depending on your assets and income.

While having to pay off your debt might not seem like an advantage over Chapter 7 (where your debts can be discharged), there are a lot of pros to seeking this option. For one, your assets will not be sold as you are paying back your debts if you have assets that would be sold in Chapter 7. You will get to restructure your debt payments, allowing you to pay less over several years and lower your monthly obligations. You will also be able to avoid foreclosure under this plan. See my other postings on Chapter 13 for a thorough explanation of how this process works.

When you file for bankruptcy, you will need to expect that your credit score will be negatively impacted. How much can depend on the type of bankruptcy you file and what your score was before filing for bankruptcy. If you were deep in debt, chances are your credit score was already suffering. Especially if you were falling behind in your credit card payments, your score could already be low. It can take several years for your score to rebound following bankruptcy. During this time, it can be more difficult to secure lines of credit.

Let Us Help You

No one should have to choose between feeding their family or paying their bills. If you are drowning in debt, let our lawyers at The Law Offices of Alexzander C.J. Adams, P.C. review your options with you and help you decide if bankruptcy is the right option for you. 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.

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