Being in debt doesn’t always have straightforward solution for everyone. Some people may be able to buckle down, cut costs, and simply pay off their debt over time, and this is the best choice, if it’s reasonable. When clients and I conduct the Means Test, sometimes it’s very clear that a Chapter 7 bankruptcy is the way to go, and other times a Chapter 13 will take care of the most debt while protecting the most property. Then there are those situations that take a little more research and require deeper consideration. For some people, it may be beneficial to file a Chapter 7, followed by a Chapter 13. We can work together to come up with the most effective solution to your debt problems.
Benefits and Drawbacks
Each way of filing bankruptcy has its pros and cons. Filing a Chapter 7 will discharge most types of debts quickly, and there is no limit on the amount that can be discharged. However, if you have a mortgage or car loan, you’ll need to stay up to date at all times or face foreclosure or repossession. Creditors are not required to give you time to get caught up on secured loan payments.
With a Chapter 13, you’ll be able to make reduced payments and will have time to get caught up on secured debt payments since you’ve fallen behind. This could save your home or car, and you could end up paying nothing toward unsecured debts. You are committing to be in bankruptcy for 3-5 years, which can be stressful. You also may not be eligible for a Chapter 13 if you owe beyond the maximum allowed amounts.
Some people choose to file both a Chapter 7 and 13, which is often referred to as a Chapter 20. By filing this way, you’ll receive the quick discharge benefits of a Chapter 7, while benefiting from the extra time to pay off secured loans as part of your Chapter 13. In these cases, a Chapter 13 will not discharge any debts that were not included in the Chapter 7, but for some people, it is still worthwhile. When you file a Chapter 7 first, you’ll reduce your overall debt. This could help you qualify for a Chapter 13 if your debt was very high. This will also free up room in your budget to pay off excluded debts such as back taxes and to afford child support or alimony payments. You’ll also have more money available for your Chapter 13 payments, which could reduce the length of your repayment period.
Here to Guide You
Bankruptcy law can be complicated, and it’s best to work with an experienced attorney who can ensure that you’re making the best decisions for your unique circumstances. If you’re unsure how you’re going to handle your debt and are considering bankruptcy, call me. Together we’ll look at all of your options, leaving no stone unturned. Soon you’ll be on the road to financial freedom.