Debts can be overwhelming especially when bill collectors start calling. Talk to a Bankruptcy Attorney In Tacoma Wa about filing bankruptcy. Attorneys review assets and income to determine if bankruptcy will help the situation. If the attorney goes forward, the client chooses between filing Chapter 7 or Chapter 13. In any case, judges issue an automatic stay when bankruptcy is filed. This means that all collection activities must stop.
Filing Chapter 13
In order to file Chapter 13, individuals must have a regular source of income. The attorney and bankruptcy trustee look at the debtor’s income, debt and property to make a repayment plan. This monthly payment is distributed among the creditors. Secured debts like mortgage and auto payments take priority.
It can be difficult to pay the bankruptcy court and current monthly bills. Indeed, filers will not have a lot of disposable income left over. Chapter 13 bankruptcy plans usually last from three to five years. The cram down is one advantage of filing Chapter 13. A cram down occurs when creditors are willing to reduce the total debt owed.
Is Chapter 7 For You?
Chapter 7 is called a liquidation bankruptcy. Basically, the debtor is saying they cannot afford to repay creditors. In turn, a court official sells many of the debtor’s assets and divides the proceeds among creditors. Some assets are exempt from liquidation based on what state the person lives in. In addition, debtors must pass the means test before filing Chapter 7.
The means test looks at whether the debtor makes enough money to actually make monthly payments. A Bankruptcy Attorney In Tacoma Wa subtracts certain expenses and debts from the client’s income. The disposable income left over must be below a certain amount. Otherwise, the debtor must file a 13.
All Debts Cannot Be Liquidated
Certain debts cannot be eliminated in bankruptcy including child support arrears and federal student loans. Further, federal and state income tax balances cannot be liquidated. However, Chapter 13 filers may be able to include the debt in the monthly payment.
Bankruptcy stays on the credit report for several years. However, consumers have a fresh financial slate. It’s not unusual to get offers of credit shortly after a bankruptcy. The goal is to make wiser financial decisions.
