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What should potential bankruptcy filers know about the process?

Many people are going to decide to take control of their finances in 2019. For some, this might mean that they need to file for bankruptcy. Unlike what many people believe, this is actually a viable tool that can help consumers who have too much debt for their current income.

Making the decision about whether to file comes down to evaluating the information you have available. You have to determine which type you should file, as well as how the case is going to affect your life right now and in the next few years.

What type should you file?

Consumer bankruptcy is filed primarily as a Chapter 7 or a Chapter 13. There are some big differences. For a Chapter 7, you have to meet the requirements of the means test. Your non-exempt assets are liquidated to pay off as much as possible to your creditors. Anything that is left after that is written off. This is known as a liquidation bankruptcy.

A Chapter 13 bankruptcy, commonly referred to as a wage earner's bankruptcy, doesn't have a means test. Instead, you have to show that you can make regular payments to the bankruptcy trustee. Those payments are divided among creditors according to a specific formula. Once you complete the terms of the repayments, any balance that remains is written off.

What happens to assets?

Your assets are divided into two categories – exempt and non-exempt. The exempt ones are those that you are allowed to keep after you file. This may include one vehicle and your home, depending on specific factors like value. Items like your clothing and furniture are usually exempt. Other assets, such as art collections and expensive jewelry, may be classified as non-exempt. These are the assets the court takes possession of and liquidates to help you pay off your creditors.

How does bankruptcy impact a filer?

The fact that you filed for bankruptcy goes on your credit report. This makes it hard for you to get new credit when you are done with the bankruptcy. Remember, you can't take on new credit accounts during the bankruptcy without the approval of the court. As part of the bankruptcy process, you will have education classes to attend. This can help you to learn how to budget, live on your income and use credit wisely.

The bankruptcy filing is a way for you to get back on track with your finances. Often, uncontrollable circumstances like job loss or medical debt are the underlying cause. You shouldn't feel ashamed about having to utilize it when necessary.

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Whether you have a family law issue, an estate planning question or are considering bankruptcy, I can help you find a sustainable solution that provides relief and hope. Schedule your consultation at my Nashua, New Hampshire office today by calling 603-635-4149 or by sending us an email.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.

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