For those unfamiliar with bankruptcy processes, determining whether or not to file a bankruptcy petition and under which chapter to file may be confusing. The following is a list of frequently asked questions in regard to bankruptcy. Gaining a better understanding of bankruptcy will help individuals make a more informed decision in regard to their debt relief options and will assist them in determining whether bankruptcy will be right for them.
1. Under what chapters are bankruptcy petitions commonly filed?
The chapters under which most petitions for bankruptcy are filed are Chapter 7 bankruptcy, Chapter 11 bankruptcy, and Chapter 13 bankruptcy. Chapter 7 involves a liquidation of assets, Chapter 11 is a restructuring of debts, and Chapter 13 establishes a 3 to 5 year repayment plan. The goal of each is the discharge or elimination of debt The chapter under which an individual files is based on their unique financial circumstances.
2. Will I be eligible for Chapter 7?
That depends. Because of the changes to the bankruptcy laws that occurred in 2005, individuals must complete a means test to determine if they will be eligible to file Chapter 7 bankruptcy. The courts will ultimately make this determination. Even if individuals are not eligible for Chapter 7 based on the means test, they will still be eligible to for file Chapter 13.
3. Will creditors keep calling if I file bankruptcy?
According to the law, all collection efforts must cease once a bankruptcy petition has been filed. Lawsuits will be discontinued, wages will no longer be garnished, and harassing telephones calls will end.
4. What is the difference between bankruptcy and debt settlement?
Bankruptcy is a legal process through which debts are eliminated. Debt settlement is not a legal process, but is a private agreement between the debtor and his or her creditors. This agreement is usually negotiated with the assistance of a neutral third party such as an attorney. Bankruptcy can provide individuals with more legal protections, but bankruptcy will appear on an individuals credit history.
5. Is credit repair possible after bankruptcy?
Yes, but it will take some time. Bankruptcy can remain on a credit report for up to 10 years. During this time, individuals can work to repair their credit and once again gain a reputable credit status.
6. What debts will be eliminated by filing a bankruptcy petition?
Almost all unsecured debt will be discharged through bankruptcy. The only types of unsecured debt that will not be discharged are: child support, spousal support, personal injury debts, income tax debt, and student loans.
7. Will bankruptcy be right for me?
In order to make this determination, it will be best to speak with a bankruptcy attorney. An attorney can evaluate your situation as well as your finances and assets to help you determine if filing bankruptcy will be advantageous. It highly recommended that those considering filing a bankruptcy petition first consult with a skilled and knowledgeable attorney. If bankruptcy is not right for you, an attorney can help you find debt relief alternatives that will be appropriate for your situation.