Bankruptcy

You may need the protection of the bankruptcy laws if you cannot pay your bills on time. Bankruptcy proceedings can help protect you against aggressive bill collectors and preserve as much of your property for you as possible.

If you cannot manage your bills, call a lawyer to learn about your rights and avoid missing advantages that can be lost over time.

Alternatives to Bankruptcy

Ask your lawyer about the alternatives to seeking relief under the bankruptcy laws.

One alternative is to contact your creditors to request a discount or additional time to pay. Another alternative is to seek the help of a reputable credit counseling service.  These organizations may be able to help you manage your bills and work out an arrangement with your creditors. A third alternative is to borrow money to pay off your debts, replacing them with a single loan and one monthly payment. Such refinancing can make sense if the repayment period is extended at a lower interest rate.

Each of these alternatives has benefits and disadvantages that a lawyer can explain. You may find that bankruptcy is your best option.

Your Options

You have two options under the bankruptcy laws.

Liquidation

In liquidation, also called Chapter 7 bankruptcy, you will be allowed to keep certain kinds of property under the exemptions allowed under federal and state bankruptcy laws. The definition of “exempt property” differs in each state, and it can include a home or car, clothing, furniture, household appliances, and tools of your trade.

Repayment Plan

In a repayment plan, sometimes called Chapter 13 bankruptcy, you pay a portion of your monthly income to a trustee for distribution to your creditors. A repayment plan is useful when you are behind on your home or car loan. The repayment plan can be used to extend, for up to 5 years, the time period for paying your bills and might allow you to pay less than you owe. The extended payment period has the advantage of allowing you to make smaller payments. You will be allowed to keep part of your monthly income to pay for living expenses like food, clothing, rent, and medicine.

To qualify for a Chapter 13-repayment plan, you must have a regular income, and your unsecured debts must not exceed $307,675. If your unsecured debts exceed $307,675, you may be able to qualify for a repayment plan under Chapter 11.

What is the best option?

A lawyer can study your situation and advise on whether Chapter 7 or 13 is right for you. The best bankruptcy alternative for you depends on several things, including your income source and the amount and types of your bills.