There are many different reasons why people file for consumer bankruptcy but the common thread is financial stress - it may be caused by credit card debt, divorce, loss of employment or medical bills, or health issues. Most individuals considering filing for bankruptcy pursue relief under either Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code and each of those are explained below.
Chapter 7 is a form of debt relief that eliminates many unsecured debts. If you are struggling to catch up on credit cards, medical bills, payday loans and other unsecured debts despite your best efforts, Chapter 7 bankruptcy may be an option for you. Chapter 7 bankruptcy is often referred to as liquidation because a bankruptcy trustee can liquidate (convert to cash) your non-exempt assets to pay part of your outstanding bills. The term liquidation is rather misleading, though, since most people filing bankruptcy in Chapter 7 cases do not have any non-exempt assets, and thus there is no actual liquidation. In order to qualify for Chapter 7 bankruptcy, you must pass a means test.
Chapter 13 bankruptcy often provides a solution for people who have faced short-term financial setbacks like job loss, illness, or large unexpected expenses. For people who have been derailed by a crisis and fallen behind on their bills, but who have regular income and are in a position to make regular monthly payments, filing bankruptcy under a Chapter 13 plan may allow the breathing room necessary to get back on track.
Many people looking to stop foreclosure or avoid repossession choose Chapter 13 bankruptcy, because it combines the automatic stay with the ability to catch up past due payments over a period of three to five years after filing bankruptcy while keeping current payments up to date. At Hillsboro Law Group, we represent individuals experiencing many types of financial stress. Our attorneys understand that filing for bankruptcy is personal, stressful and oftentimes a last resort but our attorneys are professional, discrete and dedicated to guiding you through the bankruptcy process.