Is Filing for Bankruptcy Right for You?

March, 2020

If you have debts that you may be unable to pay, and you're thinking of filing for bankruptcy, here are some thoughts to consider when navigating the process.

Credit Counseling First
Credit counseling is a good first step before filing for bankruptcy. It doesn't take very long and you'll learn about other debt relief options such as debt negotiation, debt consolidation loans, and debt management plans. A financial counselor will review your options with you and can make a recommendation on what solution is best for you. When filing for bankruptcy, completing a credit counseling course from an approved counseling agency is a requirement so you will want to seek out an approved provider.

Chapter 7 Bankruptcy
Before you can file for Chapter 7 bankruptcy, you must meet a number of qualifications. These qualifications include passing a "means test" that takes your income and source of debt into consideration. You must also complete a credit counseling course, as mentioned above, and you must not have had a recent bankruptcy discharge or dismissal.

Chapter 7 vs. Chapter 13 Bankruptcy
Chapter 7 bankruptcy is the most common type of bankruptcy. When you file for Chapter 7 bankruptcy most of your property is sold and used to pay off your debts. This is known as a liquidation bankruptcy and is generally meant for people with limited incomes who do not have the ability to pay back all or some portion of their debts. Generally, this type of bankruptcy can be completed in three or four months. However, once complete, it can remain on your credit report for up to 10 years.

Chapter 13 bankruptcy is known as a reorganization bankruptcy as rather than selling off your personal property, you complete a court-mandated repayment plan over a fixed period of time. Same as with Chapter 7, you must go through credit counseling. When your debts are paid, the Chapter 13 bankruptcy will be discharged which normally takes about five years.

It is important to find an experienced bankruptcy attorney. Professional advice from an attorney can help you determine if filing for bankruptcy is right for you. An attorney will help evaluate your debts and finances and determine your options, including whether you meet the qualifications to file for bankruptcy.

Legal Club offers free and discounted legal care, including discounted rates on Bankruptcy. To learn more about the plans offered by Legal Club, browse this website or call us at 800-305-6816.

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