It’s easy to fall into a downward spiral with finances. It starts off as a few extra purchases and the next thing you know, you’re overwhelmed with debt. Maybe you’ve always been responsible with your budget, but you lost your job and are struggling to keep up with your monthly payments and financial commitments.

Regardless of your financial situation, bankruptcy can be a great way to get out of debt and start over. For individuals looking to file personal bankruptcy, the most common options are Chapter 7, Chapter 11 or Chapter 13.

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Personal Bankruptcy with Chapter 7

Chapter 7 bankruptcy can help you get out of unsecured debt (medical bills, credit cards, private loans) and protect some of your assets. It can also end creditor harassment by stopping those annoying calls and letters from collection actions and protect you from potential lawsuits, wage garnishments, and bank levies.

How Chapter 7 Bankruptcy Works (The Basics)

  1. Some of your property will be labeled exempt (protected from liquidation).
  2. Your trustee will sell all of your other nonexempt property.
  3. The proceeds from this sale or liquidation will be used to pay your creditors.

Chapter 7 Bankruptcy Won’t Settle These Debts

  • Student loans
  • Certain taxes
  • Alimony
  • Child support
  • Debts obtained through fraud

Chapter 7 bankruptcy is a great option for some, but it may require the sale of your home or other assets. If you want to keep your property, then you should consider a Chapter 13 bankruptcy instead.

Personal Bankruptcy with Chapter 13

Chapter 13 bankruptcy helps people protect their assets. You can likely keep your home, reduce your debt, and catch up on back payments for mortgages, vehicles, and taxes. You may qualify for Chapter 13 if you have a regular source of income and you don’t exceed certain debt limits of unsecured and secured debts.

How Chapter 13 Bankruptcy Works (The Basics)

  1. Credit counseling must be completed prior to filing.
  2. The bankruptcy court collects a $310 filing fee to start your case.
  3. You must file an official voluntary “Petition for Individuals” form and certain other statements with the bankruptcy court.
  4. Create and submit your Chapter 13 bankruptcy plan.
  5. Start making monthly payments to your Chapter 13 trustee in the first month after filing your petition.
  6. 341 meeting of creditors.
  7. Complete the personal financial management course and file a certificate with the bankruptcy court.
  8. Your Chapter 13 trustee and your creditors will review the plan and confirm it or make objections.
  9. After you’ve completed your Chapter 13 plan payments and filed the required forms, the bankruptcy court should enter a discharge order in your case.

These steps may look simple on the surface, but Chapter 13 bankruptcy can be extremely complex. Even some bankruptcy lawyers don’t fully comprehend it if they don’t specialize in Chapter 13 filings. You need an experienced bankruptcy attorney to help you through a Chapter 7 or Chapter 13 filing.

About Middlebrooks Shapiro

At Middlebrooks Shapiro, P.C., our attorneys have over 30 years of bankruptcy law experience. From our office in Springfield, NJ, we help clients with the most basic or complex personal and business bankruptcy cases by leading them through the legal process of numerous practice areas.

Call 973-218-6877 to speak with the experienced bankruptcy attorneys at Middlebrooks Shapiro. We’ll ensure you get the perspective you need to understand the full picture and the right guidance to have a successful bankruptcy, rebuild your credit, and move forward with your new debt-free life.