Medical bills. Credit card debt. Divorce. Life happens. You wake up one day and your financial struggles have multiplied overnight. You’re in over your head, and you know that you need help. Could declaring bankruptcy be the answer?
Learn the laws, discover your options, and find out whether declaring bankruptcy could be the right choice for you. Educate yourself about bankruptcy, and then contact Pew Law Center to determine what the best path towards a better future will be.
The Two Types of Bankruptcy: Chapter 7 vs. Chapter 13
Chapter 7 bankruptcy cancels many, if not all, of your debts outright in a short process that usually takes 4-6 months. If your debts are very high and your income is very low, you will most likely qualify for this type of bankruptcy.
Chapter 13 bankruptcy is a different option where you use your income to make payments on your debts for the next 3 to 5 years. This type of bankruptcy is best for people who have sufficient disposable income to pay towards their debts.
The advocates at Pew Law Center can help you decide which type of bankruptcy is the best choice for you.
Debts That Can’t Be Discharged
Declaring bankruptcy eliminates many types of debt, but not all. Bankruptcy is best for wiping out unsecured loans, such as credit card debt. However, money owed for student loans, alimony, child support, secured debt, and many types of tax debt cannot be discharged. The team at Pew Law Center can help determine which debts can be eliminated by bankruptcy, and what to do about the ones that can’t.
Consider Your Property
Do you own a home? Bankruptcy won’t get rid of your obligation to make mortgage payments, but it can make things easier by eliminating other types of debt. Many homeowners opt for Chapter 13, which saves your home and gives you 3-5 years to catch up with any mortgage payments that you are behind on.
For cars and other valuable assets, how much property you can keep depends on the exemption laws in your state, and whether the property has been pledged as collateral for a debt.
Did a relative or friend help you obtain financing by agreeing to co-sign on the loan for a car, furniture, or anything else? If you file for Chapter 13 bankruptcy, your cosigner will be protected – but with Chapter 7 bankruptcy, your cosigner may be stuck with the debt that you do not pay.
What About Retirement Savings?
Pensions, life insurance, and retirement accounts such as IRAs and 401(k) are generally protected in most states. They are considered exempt property, which means that you get to keep them if you file for bankruptcy.
Are you considering declaring bankruptcy? Don’t go it alone. Pew Law Center is here to help.
Download a free copy of 6 Bankruptcy Myths that Could Destroy Your Finances (and What to Do Instead!) – and take the first step towards a future free of debt.