November 7, 2020
The simple answer to this question is that most or all of your debts are cleared when you declare bankruptcy. Of course, this also depends on the particular chapter that you file under. Regardless, bankruptcy is what happens when the debts you owe outweigh the amount of money you make in order to pay those debts.
Oftentimes, bankruptcy is the final resort for people who are looking for a fresh start to their finances and a way to clean their slate of dischargeable debts.
In this blog post, we’ll go over all the basics you should know when it comes to filing for bankruptcy.
When to File for Bankruptcy
There are few telltale signs that indicate it may be time to consider filing for bankruptcy. While there tends to be a negative connotation associated with bankruptcy, it can offer more advantages for those in serious revolving debt than not.
If you are experiencing the following, consult with a qualified bankruptcy lawyer at Cravens & Noll to discuss your filing options:
- Your wages are being garnished
- You’re using credit cards to pay for everything
- You’re using your retirement account to pay for bills
If any of these are happening to you, and you find that you are in what seems to be an unending cycle of debt piling on top of debt, it may be time to declare bankruptcy.
When you successfully file, whether it’s Chapter 7 or Chapter 13, a court-mandated automatic stay is put on your account which prevents creditors from trying to collect on your debts. This means they can’t garnish wages, take money from your bank account or try to take any of your other assets.
Chapter 7
Known as the liquidation chapter, this chapter is common for people who are in very severe debt with limited income. Only in very rare cases does bankruptcy take your state’s nonexempt assets and sells them off to pay creditors. In fact, in almost all Chapter 7 cases you will be able to keep all of your property.
To be eligible for this chapter, you must make under your state’s household income level or go through a “means test” to determine that you don’t have enough disposable income to repay the debts.
Once successfully filed, a filer will be cleared of their dischargeable debts within 3-5 months from the start date of filing. When a debtor files under this chapter, a bankruptcy note on their credit report will remain there for 10 years.
Chapter 13
Chapter 13, referred to as wage earner’s plan, is for the filers who are making a consistent income but still have a large amount of unsecured and/or secured debt. This filing is usually a 3-5 year repayment plan and, once completed, will clear the debtor of most or all of their debt. When a debtor successfully files under this chapter, there is a court-approved repayment plan that your attorney creates for you. In that plan, the debtor makes regular payments to a bankruptcy trustee who then distributes the funds to the appropriate creditors/lenders. You can modify the loans that you have outstanding debts on per your repayment plan in this chapter.
Because you are still making payments on your loans when you file under this chapter, the bankruptcy note on your credit report will remain there for 7 years as opposed to Chapter 7’s 10 years.
Advantages & Disadvantages of Bankruptcy Filings
The primary reason to file for bankruptcy is that it gives debtors a fresh start to begin rebuilding their finances. More times than not, bankruptcy is a last resort for people dealing with a revolving door of debt. A bankruptcy filing also prohibits creditors from attempting to collect during the filing process, relieving debtors of that additional stress.
The disadvantages that come with a bankruptcy filing are usually due to how it affects a filer’s credit score. Regardless of if you file for Chapter 7 or Chapter 13, there will be a note on your credit report, making it a bit more difficult to receive loans.
On the positive side, the process of filing, whether it’s Chapter 7 or Chapter 13, gives you a chance to rebuild your score and, oftentimes, requires a credit counseling/financial literacy course to help debtors become more aware of how to properly handle their finances.
Bankruptcy Attorneys at Cravens & Noll
The first step in any process of a bankruptcy filing is to get connected to a qualified bankruptcy attorney. Speaking first with a lawyer will help clear up which chapter you are best suited to file under, what property you can keep (which often is all of your property), which assets are protected by your state and which is the best repayment plan (if you file under Chapter 13) for you.
The lawyers at Cravens & Noll P.C. have hundreds of cases and can help you understand the benefits and risks of filing for any chapter of bankruptcy.
Are you thinking about filing for bankruptcy? Get in touch with us today to handle your financial needs.
At Cravens & Noll, an experienced Virginia law firm, we are Your Lawyers For Life and have protected and served the rights of over 30,000 people just like you throughout Virginia across 4 Decades in Business. This is why we have been voted one of The Best Law Firms and The Best Attorney in Richmond by the Richmond Times-Dispatch.
We know that every legal case is always…personal. No matter what you are facing right now our attorneys will provide the solutions you need, at a reasonable price. Whether divorce, personal injury, criminal charges, or bankruptcy. We work hard to be your lawyers for life. That means giving your individual case the one-on-one attention and care it deserves.
Our team of trusted and local lawyers will never give false expectations about the potential outcome of your case. You can count on a realistic assessment of your case, in order for you to make a sound decision.
With offices in Richmond and Harrisonburg, we will assist you with dedicated and professional legal advice. In times like this, you need answers, stability, and confidence. Our calculated approach quickly evaluates and stabilizes your situation immediately to prepare you for the legal matters ahead. Our goal as your attorney is that you feel immediate relief from the moment you contact us. We can meet with you face-to-face, by video, by telephone, or together in our office.
Contact our Virginia attorneys today for a consultation. At your appointment, we will ease the burden on your shoulders and provide you with options on how to proceed. Before taking a case, Cravens and Noll lawyers provide an initial consultation for clients.
