If you are burdened with immense debt, then bankruptcy is a way out. People, on one hand, are happy to get back on financial track yet simultaneously, they are also scared of the ill effects of bankruptcy. However, bankruptcy might not be the best way to resolve your problems. Before you file for bankruptcy, Dallas based bankruptcy law firm Recovery Law Group says you should ask the following questions:
- Which bankruptcy chapter is ideal for me?
Individuals can file for bankruptcy under chapter 7 or chapter 13. In the case of former, non-exempt property is liquidated by the bankruptcy trustee and the proceeds are used to pay off the creditors. Almost all unsecured debts like medical and credit card bills are discharged in this case, but secured debts like mortgage and car loan survive a bankruptcy discharge. You can use federal or state exemptions like homestead exemption etc. to protect your assets like home during bankruptcy. However, to qualify for this chapter, you need to have a household income below the state median, or you will be required to pass the means test. In the case of chapter 13, the reorganization of debts takes place and the debtor pays off the creditors through a court-approved repayment plan based on their disposable income. Generally, this plan is for people who have income more than the average individual in the state and wish to protect their non-exempt property.
- What debts are forgiven in bankruptcy?
If you think that bankruptcy will get rid of all your debts, you are sadly mistaken. Those debts that are not forgiven in bankruptcy include secured debts like mortgage and automobile loans. Additionally, priority debts like tax debts, alimony and child support, student loan, etc. are also not erased in either bankruptcy chapters. For more knowledge of debts that can or cannot be discharged in bankruptcy, you can ask experienced bankruptcy lawyers at 888-297-6023.
- What happens to assets belonging to pension and retirement funds?
Pension plans, life insurance policies as well as retirement accounts like 401(k), IRAs, etc. are protected from becoming part of your bankruptcy estate thanks to state or federal bankruptcy exemptions. However, some retirement plans might not be exempted from bankruptcy.
- Can your debt consignor be affected by your bankruptcy?
When you opt for bankruptcy, any person who has cosigned your debt will be held responsible for the payments on your agreement. Though chapter 13 generally protects co-signers of the debt, chapter 7 does not offer any such protection.