Things You Should Know About Bankruptcy

People who become insolvent for one reason or another usually look to bankruptcy as a last resort solution to their problems.

However, bankruptcy is a serious issue and the decision to go through with it shouldn’t be taken lightly.

Before you decide that bankruptcy is the best option for you consult experts like attorneys at Chang & Diamond, APC.

Every case is different and once they know the specifics of your case, bankruptcy attorneys can help you determine what the best option for you actually is.

How Do I File?

Filing for bankruptcy is a good way to get rid of all of your financial burdens, but it will not be all smooth sailing. In fact, the road to bankruptcy and subsequent recovery is going to be a long one, so make sure you are actually ready for it.

When you ask to file for bankruptcy, you will essentially have to present your case to the judge or some other figure of authority. You will need to explain how you got into the financial problems you are trying to escape.

At the same time, your entire asset and debt list will be given to the court for revision.

The Assets

All of your possessions will need to be reported to the appropriate authorities and revised. They are split into two broad groups – exempt and non-exempt assets.

The name is fairly self-explanatory. Exempt assets are those which will not and cannot be taken away from you in order to pay off your debts. For instance, your home is one such asset, as well as your car.

On the other hand, non-exempt assets are those which the court deems expendable and which can be sold off in order to pay off your debts at least in part before other debts are written off. Any other real estate other than your home, as well as boats, are good examples of things you must be prepared to lose in a bankruptcy.

The Debts

Just like your assets are divided into two categories, so are the debts. There are the secured loans which you will need to pay off in one way or another. These are mortgages, student debt, some tax payments, and similar.

The other type of debt is non-secured. Credit cards, medical bills, and similar debts fall into this category. These have no property or other insurance on them.

Chapter 7

Once all of your assets and debts were accounted for, you need to decide what kind of bankruptcy you want. The simplest form of personal bankruptcy in Chapter 7. You can learn more in-depth about it in this article https://www.thebklawyers.com/san-diego-chapter-7-bankruptcy-lawyers/.

In essence, all of your exempt assets remain in your possession, whereas non-exempt ones are sold off in order to pay off some of your debts.

When it comes to debt, the unsecured debts are written off and you won’t have to pay them off, but those which were secured stay firmly in place and will need to be paid through the sale of your non-exempt property.

Chapter 13

On the other hand, Chapter 13 doesn’t offer to write off any of your debts. However, what it does is reprograms your debts and offers you additional time to consolidate your finances and repay your debt over the longer period (typically three to five years).

In this case, none of your property is sold off and you come up with a repayment plan which includes yourself, your creditors and the trustee who serves as an intermediary between the two of you.

Most people with higher earnings prefer the Chapter 13 because they get to keep their assets if they show that they can successfully pull themselves out of the bad financial situation. Consider your case carefully and consult a bankruptcy professional before you make any decision.



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