Filing for bankruptcy is a significant decision that impacts your personal and financial future. Without proper guidance, understanding the different bankruptcy chapters and selecting the right one can become complicated.
This article delves into expert insights from a Northern Kentucky bankruptcy lawyer that can help you navigate the bankruptcy process more effectively.
Key Takeaways:
- Choosing the right bankruptcy chapter involves carefully assessing several factors, including eligibility and current financial situation.
- Consulting with a knowledgeable Northern Kentucky bankruptcy lawyer can offer you personalized insights and guidance you need to make an informed decision.
Table of Contents
Your Options: Chapter 7 vs. Chapter 13
The two common types of bankruptcies available for individuals and companies are Chapter 7 and Chapter 13. They are primarily governed by federal law, but local practices and procedures also play a critical role.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy can be used when an individual is looking to wipe out general unsecured debts such as credit cards and medical bills. This process involves liquidating the debtor’s non-exempt assets to pay creditors.
Here are a few key points:
- Eligibility —Not everyone qualifies for Chapter 7; it's primarily for people with limited incomes who pass the "means test," which compares their income to the median income of the state.
- Impact —While Chapter 7 can eliminate most of your debts, depending on specific exemption laws, it may require you to give up some of your property.
- Outcome —Successful discharge results in the elimination of debts, offering a fresh financial start.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy works differently. It allows debtors to keep their property and pay debts over time, usually three to five years. It is particularly beneficial for those with regular income but need to restructure their debts to make them manageable.
- Eligibility —Chapter 13 requires that you have a regular income and your total debt does not exceed certain limits.
- Process —The debtor proposes a repayment plan that involves making installment payments to creditors over a period of three to five years.
- Advantages —Chapter 13 stops a house foreclosure, makes up for missed car or mortgage payments, and allows you to retain non-exempt property.
Factors to Consider When Choosing Between Chapters 7 and 13
When choosing between Chapter 7 and Chapter 13, you need to consider several factors, including:
1. Financial Management
Chapter 13 requires a steady commitment to a monthly budget and meeting plan payments, which can be challenging over several years. Chapter 7 is less demanding in terms of financial management after the bankruptcy is discharged.
2.Exemptions
Kentucky has exemption laws that protect certain types of assets in a bankruptcy. Understanding these exemptions is crucial in determining which chapter will better protect your assets.
3. Impact on Credit
Both types of bankruptcy will negatively impact your credit score, but Chapter 7 remains on your credit report for ten years, whereas Chapter 13 stays for seven years. That said, future lenders may favorably view your ability to repay some debts in Chapter 13.
4. Type of Debts
Evaluate the types of debts you have. Chapter 7 can quickly discharge most unsecured debts like credit cards and medical bills. However, if you need to deal with secured debts like a home mortgage, car loan, or non-dischargeable debts like certain taxes or student loans, Chapter 13 provides mechanisms to manage these through a repayment plan.
5. Future Financial Goals
Consider how each chapter aligns with your long-term financial goals. Chapter 13 can be more structured and disciplined, setting a foundation for better financial habits in the future.
Legal Guidance is Key
Given the complexities of bankruptcy, consulting with a Northern Kentucky bankruptcy lawyer is crucial. They can provide detailed advice based on your specific financial situation. A lawyer can help you:
Talk to the Best Bankruptcy Lawyer in Northern Kentucky
If you are considering bankruptcy in Northern Kentucky and need help understanding all your options, call the best bankruptcy lawyer, W. Ron Adams. He will review your case in detail, help you choose the right chapter, and file it on your behalf. Contact us to schedule your free bankruptcy consultation.
