FAQs Bankruptcy (Part 2)

In part 1, we answered some of the most common bankruptcy questions including explanations on:

• The difference between a debt negotiation services provider
• How to file bankruptcy
• How to avoid repossession of an automobile

In part 2, we’ll answer some of the most common questions on Chapter 13 bankruptcy.

How does a Chapter 13 bankruptcy differ from a Chapter 7?
A Chapter 7 bankruptcy allows for the full discharge of unsecured debts such as credit cards, medical bills, and personal loans. To file personal bankruptcy under Chapter 7, a filer must first pass a means test which takes income, assets, expenses, and liabilities into consideration. To file a Chapter 13 bankruptcy, a filer will usually have an income level above the state median and assets valued over $100,000. Instead of a full discharge of debts, the result of a Chapter 13 filing is that a court approved payment plan is established requiring the filer to make payments over a period of three to five years.

Are Chapter 13 attorneys worth the money?
Due to the complexity of the bankruptcy process and the various actions which can produce favorable outcomes, Chapter 13 attorneys are usually well worth the cost. Chapter 13 lawyers can save someone filing personal bankruptcy hundreds of thousands of dollars through actions such as lien stripping. This action effectively discharges any home loans which are subordinated to the first mortgage if the value of the home has fallen below the balance due on the first mortgage.

How will I know which type of bankruptcy will give me the best result?
The best way to determine whether to file a Chapter 13 bankruptcy or a Chapter 7 is to consult with an experienced bankruptcy attorney. An initial consultation can confirm whether filing bankruptcy will provide the best option or whether there might be a better solution for your personal situation. If a bankruptcy filing is determined to be the best option, having a qualified bankruptcy attorney navigate the process can ensure that all opportunities are explored and acted upon.
Regarding the decision to file personal bankruptcy, there are no questions which shouldn’t be asked. Work with an experienced bankruptcy lawyer, ask any question that comes to mind, and start rebuilding your financial future.