The thought of filing bankruptcy is scary to many consumers. They don’t know whether the filing will help them. Experts say to consider why you want to file. Are you struggling to pay monthly credit card debt? Is the mortgage company threatening to foreclose on your home?
Bankruptcy is not a Magic Bullet
Bankruptcy eliminates credit card debt and hospital bills. However, the debtor cannot discharge secured debt like mortgages and auto payments. Debtors cannot discharge student loans, federal and state tax debt, and child support arrears. Filing bankruptcy makes sense if you’ve been sued by a creditor. Anyone with a judgment against you can garnish your wages. The judge issues an automatic stay when a bankruptcy is filed. The stay stops garnishments, foreclosures, and repossessions. However, it’s important to remember that current payments must still be made on secured property.
Chapter 7
Bankruptcy Lawyers in Tallassee, AL, help clients choose between Chapters 7 and 13. They are the most common bankruptcies used by consumers. Chapter 7 works best for low-income debtors who don’t own a lot. A bankruptcy trustee is assigned to each case. This trustee sells most of the debtor’s property to pay off debt. The courts allow each debtor to keep property that is exempt from liquidation. Exemptions allow the debtor to keep items that are necessary to live and work. For instance, the court may allow an exemption for a car worth $5,000. Further, a portion of the equity in the debtor’s home may be exempt.
Chapter 13
Chapter 13 is for debtors who have a regular monthly income. The trustee and Bankruptcy Lawyers in Tallassee, AL compile a list of what the debtor owes. The list includes arrears on secured debt and federal taxes. The debtor makes a monthly payment to the trustee to pay off the debt. Many debtors find it difficult because they must also make current payments. Chapter 13 payments are spread over three to five years. The debtor must live a frugal life during this time. There won’t be a lot of extra money. Bankruptcy is not designed to be comfortable. The idea is to give debtors an opportunity for a fresh financial start. For more information, visit Courtney & Mann LLP.
