Filing for bankruptcy protection is most likely the last thing anyone wants to do, but understanding when you are in need of protection is really rather easy. Becoming bankrupt is a black and white experience much more than it is a gray one. As a general rule of thumb, you are completely financially bankrupt if your current sustainable income plus any cash reserves will not pay all of your living expenses, pay interest on outstanding loans, and reduce some of your principal on those loans while paying on them for five years. Depending on which state you live, this definition of bankruptcy should not include any of your retirement moneys as cash reserves. Paying off debts for five years is chosen because five years is the maximum legal number of years a United States Bankruptcy Court allows an individual to work their way out of bankruptcy.
When you find yourself in a complete bankrupt situation, there are certain advantages for filing for bankruptcy protection. Here are eight advantages bankruptcy protection might offer a bankrupt debtor:
- You can obtain an automatic stay which is applicable to all types of bankruptcy filings. That means the mere request for bankruptcy protection automatically stops and brings to a cessation certain lawsuits, foreclosures, utility shut-offs, evictions, repossessions, garnishments, attachments, and debt collection harassment.
- Filing might save your home.
- You can reschedule secured debts.
- You can receive protection for co-debtors.
- You can keep all property.
- You can consolidate all your loans under one plan.
- All or part of your loans may be completely discharged.
- You can extend certain tax obligations, student loans, or other such qualifying debts.
There are two types of bankruptcies most individuals can file- a Chapter 7 or a Chapter 13. A Chapter 7 bankruptcy, commonly called liquidation of your assets, is normally the simplest and quickest form of bankruptcy. It is available to individuals, married couples, corporations, and partnerships. A chapter 13 bankruptcy is the second bankruptcy available to individuals and is called a wage earners plan. It enables individuals with regular income to develop a plan to repay all or part of their debts.
If you have an income and qualify for a Chapter 13, there are certain advantages for filing one. These advantages are: to save your home from foreclosure; to reschedule secured debts; to provide protection for co-debtors; to consolidate your loans under one plan; to keep non-exempt property; to extend certain tax obligations, student loans, or other such qualifying debts; and to qualify for bankruptcy relief. For the most part, filing a Chapter 7 will not afford you these various opportunities listed.
So, if you have assets you want to keep, you currently have an income, and you want to try to pay your creditors as much as what is reasonable, you may want to consider filing a Chapter 13 bankruptcy. If you do not have many assets, you do not have much equity in your home or other secured type loans, and you want to get out from under the burden of your debts, you may want to consider filing a Chapter 7 bankruptcy.
If you determine you are bankrupt, common sense indicates you will need a bankruptcy lawyer in order to properly understand how complex bankruptcy laws may apply in your situation. If you determine you are in need of relief from the stress associated with debt and you live in or around the metropolitan area of Kansas City, Missouri and Kansas, contact us here today at . We will help you find a bankruptcy attorney in your area that will help you with any questions you may have on bankruptcy law.
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