How do I Know Which Type of Bankruptcy is Right for Me?

If you are thinking about filing for personal bankruptcy in Oak Park, you may be overwhelmed and a bit confused by the different types of consumer bankruptcy. For example, you might have heard that a friend or family member recently filed for Chapter 7 bankruptcy, but that another acquaintance was ineligible to file for Chapter 7 and ended up filing under Chapter 13 instead. Or, perhaps you know someone who learned their consumer debts made them ineligible for Chapter 13 bankruptcy, which led them to file for Chapter 11 bankruptcy instead. While most consumers file for either Chapter 7 or Chapter 13 bankruptcy, some also file for Chapter 11 bankruptcy depending upon their income and debt levels. We have some questions to help you learn more about the type of bankruptcy that is right for you.
Do You Have a Steady Income?
If you have a steady income and you earn a decent salary, you may be ineligible to file for Chapter 7 bankruptcy. As the U.S. Courts website clarifies, any debtor who wants to file for Chapter 7 bankruptcy needs to be able to pass the “means test.” If you still have discretionary income remaining after you pay your bills and other expenses, you may not pass the means test and thus may not qualify for Chapter 7 bankruptcy.
In this case, you will most likely want to consider filing for Chapter 13 bankruptcy. Many consumers find themselves in this situation after dealing with unexpected and high expenses, such as emergency medical bills. Unlike Chapter 7, your assets are not liquidated when you file for Chapter 13 bankruptcy. Instead, you develop a repayment plan to repay your creditors over the course of a number of years. Once that time is up, if you stuck to the payment plan, your remaining debts can be discharged.
However, you may not be eligible for Chapter 13 if your debts are too high. If you have unsecured debts of more than $394,725 and/or secured debts of more than $1,184,200, you cannot file for Chapter 13 bankruptcy. Instead, you will need to learn more about filing for Chapter 11 bankruptcy.
Are You Trying to Avoid Foreclosure?
Regardless of whether you can pass the “means test” and qualify for Chapter 7 bankruptcy, filing for Chapter 13 bankruptcy may be the better option for you if you are trying to stay in your home and avoid foreclosure. When you file for Chapter 13 bankruptcy, the automatic stay will prevent the foreclosure process from moving forward. Then, through your repayment plan, you can get back on track with your mortgage and keep your house or condo.
You will have to stay current on your mortgage payment, and you will need to make regular payments moving forward. Yet, significantly, if you are able to make payments consistently throughout the three-to-five-year period of your repayment plan, you can prevent your home from going into foreclosure.
Contact an Oak Park Bankruptcy Lawyer
Do you have questions about the type of bankruptcy that is right for you? A bankruptcy lawyer in Oak Park can discuss your options with you. Contact the Emerson Law Firm today for more information.
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