If you’re in over your head in debt, filing bankruptcy is one option available to help improve your financial situation. There are two common types of bankruptcy. Read on to learn which solution might work best for you.
What Is Bankruptcy?
Sometimes life throws you a curveball, and your financial situation changes. Economic hardships can be caused by medical emergencies, deaths in the family, loss of job and divorce. When things like this happen, it can mean that you are spending more than you make, and you’re soon in a lot of debt. When it becomes too much to pay, filing bankruptcy can be an option. Bankruptcy is a formal court hearing where you request to have your debt either cleared or restructured to make it more affordable. A bankruptcy lawyer Rockville MD may be able to help you determine which type of filling is best for your situation.
When Is Chapter 7 the Right Option?
When your income is below a specific threshold and your assets are low, Chapter 7 may be available. This type of bankruptcy eliminates your qualifying unsecured debt, such as past-due medical bills and credit cards. If you have secured debt, such as a home or vehicle, you may be required to sell that property to pay off your debt, depending on the amount of debt you owe and the value of your property.
How Is Chapter 13 Different than Chapter 7?
If you have too much debt, make too much money or own too many assets to qualify for Chapter 7, then Chapter 13 may be a different avenue to pursue. When you file this type of bankruptcy, a trustee evaluates your debt and creates a repayment plan based on your disposable income. This restructuring requires you to pay the trustee a set amount each month for three to five years but allows you to keep your property as long as you continue making payments each month.