A popular misconception about bankruptcy is that you must be flat broke, nothing left, and no hope to file bankruptcy. Or that if you do file bankruptcy, the court will take all you own and leave you broke, homeless, and with no possessions. Both of these myths couldn’t be farther from the truth. Bankruptcy is a way for you to keep your belongings, and one type of bankruptcy requires you to have a steady income to qualify.
Protecting Your Assets
Filing bankruptcy is a good tool to protect your home and your car if you are so far behind you are in danger of losing them. As soon as you file bankruptcy, an automatic stay goes into effect, stopping all collections and legal actions taken against you regarding your debt. This means all phone calls, letters, repossessions, wage garnishments, evictions, and utility shut-offs, to name a few, are halted.
In both types of personal bankruptcy, Chapter 7 and Chapter 13, you have state or federal exemptions. That means they cannot be taken to be sold to satisfy your creditors. These exemptions usually cover your home, your car, your household furnishings, clothing, jewelry, and any tools you need to perform your job. For the majority of people that file bankruptcy, they lose none of their possessions.
Chapter 7 is the most common type of personal bankruptcy. Chapter 7 is often referred to as the liquidation bankruptcy. In as little as three to six months, all of your qualifying unsecured debt will be eliminated. Your credit cards, medical debt, personal loans, payday loans, past utility bills, and other nonsecured debt will be wiped away, and you will no longer be responsible for paying them.
Chapter 13 bankruptcy is called a reorganization bankruptcy. It is for those that wish to keep all of their assets, including their secured debt, such as a home or a car. This type of bankruptcy is when you have fallen behind in your secured payments and need more time to catch up then what the lender is providing. You and the court will agree on a payment plan for three to five years to pay back the arrears. After you have completed your payments, any unsecured debt left will be eliminated. If you wish to keep the collateral on secured debt, you will need to continue to make the payments.
If you would like more information about how bankruptcy could help you, contact a Hidalgo County bankruptcy attorney today.