Often our clients ask themselves if they should file for Bankruptcy and if so, what type. This is a very common question, and the answer depends on many factors. A good Bankruptcy lawyer will need to ask many questions to understand your financial history and determine your eligibility based on the facts of your unique situation.
Whether you are eligible for discharge and information about your income are always the first two items your lawyer has to figure out. A person is eligible to have their debts “discharged” once every 8 years. Also, there are income guidelines based on household size and poverty levels established by the most recent US Census that are used to determine eligibility based on income.
If you meet the rules of both of these standards, a Chapter 7 liquidation or “fresh start” is the most commonly filed type of Bankruptcy. A person filing for Bankruptcy is called a “debtor”. A Chapter 7 Bankruptcy allows a debtor to discharge, or eliminate, most unsecured consumer debt. Generally, the Chapter 7 Bankruptcy process takes approximately 90 days from the filing date to discharge. However, there are several planning factors to consider and it is important to speak to an experienced bankruptcy lawyer as soon as you begin to wonder if this is the right move for you.
If you don’t meet the eligibility standards for a Chapter 7 Bankruptcy (or you are trying to save your house from a sheriff’s sale due to a tax delinquency or mortgage foreclosure) Chapter 13 Bankruptcy might be appropriate for you. Chapter 13 Bankruptcy gives the debtor protection from people trying to sue you in collections. Chapter 13 Bankruptcy also goes through a process called “reorganization” through a “Bankruptcy Plan”. The Bankruptcy Plan is approved by the Court and is administered by a Chapter 13 US Trustee who is appointed to your case. The Bankruptcy Plan will organize your finances and set out a way to make payments towards your debts.
In a Chapter 13 Bankruptcy, your debts will not be totally discharged. Generally, a Chapter 13 Bankruptcy lasts either 36 or 60 months from the filing date to discharge, based on various factors. There are several planning factors to consider and it is important to speak to an attorney as soon as possible if you have fallen behind.