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The Right Bankruptcy for You—Choosing Your Chapter

Debt isn’t a bad thing.

Going into debt can be an essential step in your passage through life. You may choose to assume debt in order to buy your first car, get an education, or buy a home for your family. Minor debts, such as monthly credit card bills and mortgage payments, are normal and in many cases necessary for a good life.

However, minor debts have the capacity to grow and engulf your good life. Unless you pay very close attention to managing your debt, you may someday find your debts now include several monthly credit card bills, loan obligations, and thousands of dollars worth of payments. At that point, you may find yourself quickly sinking into an inescapable pit of debt.

When you find yourself giving over your entire paycheck merely to pay interest on debts—without making any real headway on the bills themselves—you may want to think about starting fresh by declaring bankruptcy. Depending on your situation, you have three options that could reduce or even erase your debts. However, each option (named after the relevant chapter in the U.S. bankruptcy code) has its own benefits, rules, limitations, and disadvantages. Therefore, before you make the commitment to file, you need to know which chapter is best for you.

The Top Three Bankruptcy Types

According to data taken from the U.S. federal court system, about one million people file for bankruptcy every year. Although declaring bankruptcy should be a last resort for financial relief, once you and your attorney decide it’s the proper course of action for your debt, you then need to decide which type of bankruptcy you’ll pursue. There are three different programs that are feasible for personal debt relief: Chapter 7, Chapter 11, and Chapter 13.

Chapter 7—The “Fresh Start” Bankruptcy

Chapter 7 is the most popular bankruptcy choice for non-business owners. In fact, almost 700,000 bankruptcy cases in 2014 were filed under chapter 7—70 percent of that year’s documented bankruptcies. The basic concept of Chapter 7 bankruptcies is that your debts are discharged and you are no longer responsible for repaying them. However, some of your assets are subject to liquidation in order to pay administrative fees and a portion of your debts to your creditors. Under federal law, you’re usually entitled to retain your pension, Social Security, unemployment and veteran benefits as well as certain items of property.

Chapter 11—The “Restructure” Bankruptcy

Chapter 11 is the third most popular choice for individual and business bankruptcies. In 2014, it accounted for more than 8,500 bankruptcies in the United States. A Chapter 11 bankruptcy allows you to reorganize, restructure, and consolidate your budget, business, and debts without the need to liquidize your assets. Instead, you and your attorney work with the creditors to set up payment plans in order to pay off large debts over a specific period of time. This not only satisfies the creditors, but allows you some breathing room and budgeting options as well. Chapter 11 is mainly used by business owners and corporations to restructure their business plans, but individuals can use it as well if they can meet income eligibility rules.

Chapter 13—The “Payment Plan” Bankruptcy

Chapter 13 bankruptcies accounted for nearly 330,000 bankruptcies in 2014, making them the second most common type of bankruptcy. A Chapter 13 bankruptcy involves repaying a portion of the debt in order to have the rest of it discharged or forgiven—a sort of “a little is better than nothing” way of thinking. This type of bankruptcy allows you to keep your assets, while developing a three- or five-year payment plan. Once the payment plan period is over, the rest of the debt will be forgiven.

Which Form of Bankruptcy Best Meets Your Needs?

Declaring bankruptcy is a big decision that can impact the rest of your life. Don’t allow poor judgment or confusion to make matters worse.

If you have over $15,000 worth of debt and are thinking about filing for bankruptcy, make sure you have the help and knowledge you need to file correctly—contact the Law Office of Casey D. Gish today! Everyone deserves a little help and guidance now and then; today, it’s your turn to get a helping hand. Call our toll free number (888-244-5957) today to get the financial relief and bankruptcy support you and your family need.

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