Which Type of Personal Bankruptcy Should You File?

Choosing to file personal bankruptcy is a monumental decision. On top of filing bankruptcy, you also need to consider what type of personal bankruptcy you want to file. The easiest way to find this information out is by scheduling a consultation with a Naples personal bankruptcy attorney at Miller, Hollander & Jeda, so that you can explore your options and discuss what type of bankruptcy is the most beneficial for you and your financial situation.

There are many different types of bankruptcy an individual can file, however, the two most common forms used for personal bankruptcy are Chapter 13 and Chapter 7. This article discusses when you should file personal bankruptcy, along with information about Chapter 7 and Chapter 13 personal bankruptcy, including what to expect and how to figure out which option makes sense for you.

When Should You File Personal Bankruptcy?

 bankruptcy form

In this day and age, many Americans are in debt. But at what point does this debt “tip the scales” and start negatively impacting our lives? A good way to find this out is by asking yourself the following questions provided by Legalzoom.com:

  • Do you only make minimum payments on your credit cards?
  • Are bill collectors calling you?
  • Does the thought of sorting out your finances make you feel scared or out of control?
  • Do you use credit cards to pay for necessities?
  • Are you considering debt consolidation?
  • Are you unsure how much you actually owe?

According to the article, if you answer yes to two or more of the above questions it’s time to take a closer look at your financial situation. You can either do this yourself or contact a financial consultant and/or a personal bankruptcy attorney in Naples. To clarify your financial status, add up all your liquid assets and the debt you owe, along with current bills. If your assets are less then your debt, you may want to consider filing personal bankruptcy. However, some debt cannot be discharged through debt, like student loans for instance. If most of your debt is in the form of student loans, child support, alimony, etc. you may need to consider alternate debt relief solutions. If your debt can be discharged by personal bankruptcy, and you don’t see any other viable debt relief strategy, you’ll want to decide on filing either Chapter 7 or Chapter 13 bankruptcy.

Chapter 7 Personal Bankruptcy

Chapter 7 bankruptcy is a great option for people who don’t have many assets and qualify for this type of debt. This type of bankruptcy is especially helpful for people whose debts total over 40% of their income and have debt that can be forgiven by Chapter 7 bankruptcy. To be eligible to file Chapter 7 bankruptcy a person must pass the means test in their state. The means test is a way of seeing if your income is less than the median income for a family of your size in the state in which you are filing bankruptcy. In addition to the means test, you are required to complete a credit counseling course through an accredited credit counseling agency.  If you do not pass the means test, you will need to file for Chapter 13 personal bankruptcy in Naples.

What To Expect

Once you have filed a petition for Chapter 7 bankruptcy with the help of a bankruptcy attorney and completed an approved credit counseling course, you can expect the following steps or actions to take place within the course of the next six months in order to have all eligible debt discharged:

  • The meeting of creditors. This meeting is where you, your lawyer and the appointed bankruptcy trustee will meet with your creditors. At this meeting, you’ll be asked questions about your financial status and the information you provided in your bankruptcy forms.
  • After reviewing information from the meeting of creditors and the paperwork you and your Naples personal bankruptcy attorney filed, the trustee will determine if you are in fact eligible for Chapter 7 bankruptcy.
  • The trustee will then determine what assets and property are non-exempt and can be used to pay off your debts to creditors. Assets that are exempt from being liquidated vary from state to state.
  • In order to resolve your secured debts, the property may be held as collateral or you can arrange to exclude this particular debt from your bankruptcy plan if you plan on paying it back in order to keep the property, such as a car or home.
  • Within three to six months, all eligible debts from your bankruptcy case will be discharged.

Chapter 13 Personal Bankruptcy

petition to file for bankruptcy

If you don’t qualify for Chapter 7 bankruptcy, you may want to consider filing Chapter 13 personal bankruptcy in Naples. This type of bankruptcy allows you to restructure any overwhelming debts you may have by setting up an approved repayment plan to be paid within a three to five year period. According to this article from NerdWallet, The goal of Chapter 13 bankruptcy is for the filer to be able to resolve some of his or her debts, as well as become current on secured loans. If you have a regular income and your unsecured debt cannot exceed $394,725, and your secured debt cannot exceed $1,184,200 Chapter 13 may work for you.

What To Expect

At your free consultation with a bankruptcy attorney, you will be able to decide if Chapter 13 is the right decision for you. Once decided upon, your attorney will help you file the necessary paper work. You will need to prove that you are eligible for a debt restructure plan via Chapter 13 to an appointed bankruptcy trustee. From here, you can expect the following:

  • Submit your payment plan. After you file the petition for Chapter 13 bankruptcy you or your attorney will need to submit your repayment plan. Even if the proposed plan isn’t approved, you will have to start making payments as outlined in the plan within 30 days of filing your petition.
  • After your petition and plan are sent in, you will have a meeting of creditors where a repayment plan will be agreed upon.
  • Within 45 days of the meeting of creditors, you, your attorney, the trustee and any creditors will meet in bankruptcy court to approve and confirm the agreed upon repayment plan.
  • For the next 3-5 years, you will make payments to your creditors according to the outline of your repayment plan.
  • To complete the entire personal bankruptcy process, you are required to attend and complete a debt education course.

If you need help filing personal bankruptcy in Naples or would like more information concerning the bankruptcy process, contact Miller, Hollander, & Jeda today. We have been helping people find solutions to their debt problems for the last 35 years and are ready to help you get on the road to financial wellness.

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