In 2021, Americans have more debt than ever before. In addition to consumer loans and credit cards, many people are also struggling with large mortgages and student loans, which have been going up much faster than general inflation. As a result, it can be very hard to keep up. If you see no way out, you should contact an experienced bankruptcy attorney. They can help you achieve bankruptcy protection, so your assets can't be seized.
As soon as you are put under this kind of protection, all collection activities have to stop, so you will no longer be harassed. What's more, no lenders can start new proceedings against you, and you will be allowed to keep all your assets for the moment. This gives you enough time to figure out a way forward with your lawyer. Let's have a closer look at how bankruptcy works and whether it would be a good solution for you.
How Can Bankruptcy Protection Help You?
Many people believe that filing for bankruptcy means you will immediately lose all your assets and have to start from scratch. But this isn't usually the case. In fact, the opposite is true because your property is protected as soon as you let your creditors know that you don't have the means to pay them back. Then, you and your lawyer will work together to find a solution.
In the end, you may decide to relinquish the assets you can't pay for, which frees you from the debt associated with them. However, depending on the kind of bankruptcy you're eligible for, you might also pay back a portion of your debts and then be allowed to keep everything. Let's examine what happens once you file and how this process can protect you from losing your possessions.
All Collection Activities Will Stop
You may be facing a variety of collection activities, which can drive you to consider bankruptcy. For example, the lenders could threaten to take away your home, car, TV, or other items you are having trouble paying for. What's more, some of them might have access to your bank account and start a wage garnishment process. This can make it even harder to get on top of your debt because you no longer have the income to support yourself.
Fortunately, your bankruptcy attorney can help you file for bankruptcy and therefore stop all these proceedings. As soon as you've made the decision and communicated it to the lenders, they are no longer allowed to come after you or demand payment. Instead, they have to wait until your case has come to a conclusion and you have had a chance to sort out your situation.
No New Actions Can Be Taken
While many people who come to us about bankruptcy are already facing collection activities, some take early action. Even if you've only been threatened by your lender and they haven't started collecting yet, you can put a stop to it by filing for bankruptcy. That way, you don't have to be worried about someone coming to take your possessions away or garnishing your hard-earned wages.
You Have Time to Get Organized
It's important to remember that this protection doesn't stop the collection process entirely, but it simply delays it. Depending on your individual situation, you might still have to pay back a part of what you owe, or you might eventually have to give up some of your property if you have no means to pay it off. However, the main benefit of bankruptcy protection is that it gives you more time.
During the protected period, you can speak to your lawyer and figure out what you want to do going forward. If you still have an income, you could come to an agreement with your lenders and pay off a part of your debt. If not, you might have to give up some of your assets in order to keep the most important ones. Your bankruptcy lawyer will guide you through the process and help you choose the best option.
What Will Your Bankruptcy Attorney Suggest?
There are two main types of bankruptcy you can file for, and the one you choose depends on whether you currently have an income and how much debt you have accumulated. Each one has certain distinct advantages, which your lawyer will explain to you when you come to the firm. While Chapter 7 allows for a clean break, Chapter 13 can be more advantageous in the long term because it doesn't affect your credit as much, and you keep your property intact.
A Chapter 7 Bankruptcy
If you're looking for a completely new start and hoping to get most of your debts discharged immediately, Chapter 7 will be the best option for you. This is suitable for people who either don't have any money coming in or who don't have anything to spare at the end of the month, after paying their regular expenses. Check with your lawyer whether you are eligible, as your income has to be below the median, or you must pass a means test.
Although Chapter 7 can be a good option for you, it's important to note that you will most likely have to sell some of your assets to pay back your creditors. Your attorney will take you through the exact laws, but unless your property is exempt, you either have to pay your lender back or relinquish the item. What's more, this bankruptcy will be on your record for around 10 years, so it will take some time for your credit score to recover.
A Chapter 13 Bankruptcy
Often called the wage earner's bankruptcy, Chapter 13 is a slightly more nuanced option because it allows you to keep your assets. You agree on a more realistic amount you can pay and then set up a repayment plan. Over the next 3-5 years, you will pay back the specified amount, and once you have fulfilled all conditions, the rest of your debt will be written off.
As you can see, Chapter 13 will take longer to complete and can be more challenging, as you will need to come up with a monthly payment for many years. However, it only stays on your record for seven years and therefore allows you to get a fresh start faster. What's more, you will have all your assets, and there won't be any more debts associated with them. In these ways, Chapter 13 can be a viable option for some families.
Bankruptcy protection can be a great relief because it immediately stops all collection activities and prevents lenders from seizing any of your assets. That way, you gain more time to sort out your situation and figure out a way forward. Your bankruptcy attorney can help you decide whether a Chapter 7 or a Chapter 13 bankruptcy is a viable option for you, and they will assist you every step of the way.
Although it might seem like a drastic step, bankruptcy can help you regain control over your situation and get a part or all of your debts discharged. Contrary to popular opinion, you will be able to move on and restart your life, and your credit score can recover within 7-10 years. Get in touch with us now at Thomas Kerns McKnight to book your initial consultation with one of our experts.