The first step to filing for bankruptcy is admitting that you need to file for one. The next one is figuring out which type of bankruptcy to file. Now, this process may be daunting, but you must choose correctly so you won’t waste a lot of time and effort. Better yet, hire a local Baltimore bankruptcy lawyer to help you out. This way, you not only get to know which one is right for you, but you will also receive much-needed help from a professional. If you are choosing between Chapter 7 and Chapter 13, continue reading below to find out which type of bankruptcy is right for you.
What is Chapter 7 Bankruptcy?
This type of bankruptcy is often filed by people struggling with credit card debt, medical bills, and the like because it’s the fastest way to clear their debt.
Who is Eligible for it?
To be eligible for this one, you have to prove to the bankruptcy court that your regular income isn’t enough to pay even a portion of your debts. This is called passing the “Means Test”. To help you pass the means test, hire a Baltimore bankruptcy attorney to help you with your case.
How Does it Work?
Chapter 7 is also known as the “liquidation bankruptcy” because, for this one, bankruptcy law requires that certain properties of yours be sold to pay unsecured debts that you have for you to get a fresh start. The liquidation will be handled by a bankruptcy trustee and he or she can only sell properties that are not protected by an exemption.
What is Chapter 13 Bankruptcy?
Chapter 13 is known as the second most common type of bankruptcy. This is for people who can afford to pay some of their debts through a repayment plan. The benefit is that debtors only need to pay unsecured creditors what they can afford.
Who is Eligible for It?
Businesses are not allowed to file for this type of bankruptcy except for sole proprietors. This can also be filed by homeowners so they don’t get evicted. And it can also be used to repay non-dischargeable tax debt in a Chapter 7 bankruptcy.
How Does it Work?
For your repayment plan, you will create a budget based on your living expenses and monthly income. You will also tell the bankruptcy court what you can afford to set aside to pay your debts each month. The court and bankruptcy trustee will then review your proposed repayment plan. Once it is approved, all you need to do is pay your disposable income to the bankruptcy trustee. You will also send in your tax return every year.
If you are not sure about which one to choose, always seek the help of a Baltimore bankruptcy lawyer. This way, you can maximize your benefits from whichever type of bankruptcy you file. And the filing process will be smoother because your lawyer will tell you everything you need to prepare. So, if you’re looking for one today, choose Attorney Richard Hackerman and he will help you with whatever you need.