Here at The HarLaw Group, LLC (HLG) we prioritize client interaction and peace of mind. With the novel coronavirus (COVID-19) in play, millions of Americans, and countless businesses, both small and large, have faced incredibly difficult decisions. One of these decisions, unfortunately, has been to file for bankruptcy.
At HLG, we begin by scheduling a consultation, gathering the necessary information to assess whether bankruptcy is necessary. If you do decide to move forward, we navigate you through the bankruptcy process.
Knowledge Base: Chapter 7 vs. Chapter 13 Bankruptcy
There are two types of bankruptcy that an individual commonly files, Chapter 7 and Chapter 13, which are under federal bankruptcy statutes. Regardless of which you file, an automatic stay occurs, which prevents most creditors from collecting on your debts for a certain period of time. This stay is important as it allows an individual to deal with immediate situations, such as a foreclosure, eviction, or a loss of utilities.
Chapter 7 bankruptcy, also known as “liquidation bankruptcy,” is the most common form of bankruptcy. Essentially, all unsecured debts (e.g., credit cards, medical bills) are liquidated. However, you are permitted to keep your “exempt” property and property that a trustee decides to abandon. Meanwhile, your non-exempt property is sold and is then used to pay off as much off your debt as possible. This is especially helpful for those with no income or insufficient income to meet their debts.
Chapter 13 bankruptcy, on the other hand, reorganizes an individual’s debt. Chapter 13 bankruptcy creates a repayment plan where you can attempt to pay off as much of your debt as possible over a 3 to 5 period. Following the debt repayment plan, a court may discharge certain debts which helps the debtor start fresh.
Whether you choose Chapter 7 or Chapter 13 bankruptcy, each can remain on your credit record. A Chapter 7 bankruptcy remains on your credit record for 10 years, while a Chapter 13 bankruptcy is usually removed after 7 years. This isn’t always a bad thing. Discharging unpaid debt can improve your credit score over time.
The Means Test
The means test explores your financial ability to pay off your debts. Essentially, the means test tries to find your disposable income by deducting certain monthly from your average income in the six months prior to filing. If your disposable income is high, you will need to file for Chapter 13 bankruptcy instead of Chapter 7 bankruptcy.
Bankruptcy is an important decision and is already stressful enough without having creditors harassing you for days on end. Stop worrying, leave the worry to us.
For more information and your free consultation, contact HLG today so we can personalize your recommendation and even explore alternatives to bankruptcy.