Believe it or not, you don’t have to give up everything you own when you file for bankruptcy protections. In fact, many Americans file for bankruptcy each year and actually keep their car and their home. There are a couple important things to consider when looking into a bankruptcy, and a Charleston bankruptcy lawyer can help you make an informed choice about how to best proceed, based on your own unique situation.
What is Bankruptcy?
In general, there are five “chapters” of the bankruptcy code, but only two actually apply to individuals. The two primary chapters that concern the vast majority of individuals and couples (as opposed to businesses) are Chapter 7 and Chapter 13. These are similar in what they attempt to accomplish, but they have very distinct differences.
Chapter 13 Bankruptcy
A Chapter 13 bankruptcy allows you to keep certain assets, including a home and cars. The debts are all placed on a plan (between three and five years), and you pay the Bankruptcy Trustee according to the plan. The money first goes to the Trustee, who then distributes the funds to creditors as ordered by the court.
In a Chapter 13 bankruptcy, creditors may not get paid everything they are owed, or they may not be able to collect interest, but they usually get paid something in proportion to the amount available and amounts owed.
Chapter 13 Failures
Like all plans, this one often fails. Sadly, the majority of Chapter 13 plans fail. Whether the debtor just can’t keep up or falls back into bad money habits, the fact is when a bankruptcy plan fails, the creditors will begin calling again, and the debtor ends up without a discharge of the debt.
Chapter 7 Bankruptcy
A far better option for lower income individuals and those with limited assets, a Chapter 7 is often called the “clean slate” bankruptcy. In a Chapter 7, you are asking for a fresh start – a complete write-off of your debts.
Reaffirm Your Debts
Regardless of how you file your bankruptcy, if you wish to keep a particular asset or piece of property, then federal law allows you to reaffirm the debt. This is a simple agreement that is acknowledged by the federal bankruptcy court, stating that although you are in bankruptcy and requesting a discharge of your other debts, you agree that this particular debt will continue to be owed and the bankruptcy will have no effect on it. The amount stays the same, the interest is the same, and so forth. In other words, you can keep things if you’re able to pay them.
Of course, a bankruptcy judge and the trustee may not agree to let you reaffirm a debt if your overall debt load is too high or if keeping the debt would only cause you to call into worse financial situations in the future.
Discussing Your Case With a Charleston Bankruptcy Lawyer
The David Aylor Law Offices represents struggling individuals and their families throughout the low country. Whether you’re just too far behind on your debts to catch up, or you are trying to save your home, we may be able to help. Give us a call to learn more and discuss your options today.