WHICH BANKRUPTCY IS RIGHT FOR ME?
Once you have decided that you do indeed need to file for bankruptcy, the next consideration is which bankruptcy to file?
In most instances, but certainly not all, the best course of action, (assuming that you qualify) is to file a chapter 7 bankruptcy. The following are the most typical reasons to file a chapter 7 bankruptcy:
- Virtually all of your debt consists of credit card debt, medical bills, old tax debt, and signature loans from credit union. This is called unsecured debt, all of which is dischargeable –can be wiped out- in a chapter 7 case.
- You are facing a bank or wage garnishment and need to put an immediate stop to it.
The following are the most common reasons to file a chapter 13 bankruptcy:
- You have a looming foreclosure. The chapter 13 filing will not only stop the foreclosure and allow you to resume your normal monthly mortgage payments, but will give you a shot at catching up on your mortgage arrearage over the course of the next five years.
- You have a home equity line that you are behind on or are merely paying interest only on. Moreover, your home is severally “underwater.” By filing a chapter 13 bankruptcy, you may be able to make the home equity line “disappear” through a concept known as “Lien Stripping.”
- You have a lot of debt, but due to the fact that you make pretty good money you simply do not qualify for a chapter 7. If you want bankruptcy relief, you will be “forced” to file a chapter 13 and make payments each month for the next 3/5 years based on your “disposable income.”
Even a “100 % plan” can be a great deal for some people.
- You obtained a chapter 7 discharge less than 8 years ago so your only option at this time if to file a chapter 13 bankruptcy. Even if you cannot get a discharge at this time, you can still stop a garnishment or a foreclosure.
- You have a great deal of tax debt compliments of the IRS that you have acquired in the last 3 years or so and the IRS is closing in fast. Paying off this priority debt inside of a chapter 13 bankruptcy may serve you well.
- A substantial amount of your debt consists of money owed to your ex-spouse as a result of a divorce. So long as the debt is not in the nature of alimony or child support, it could very well be deemed dischargeable in your chapter 13 bankruptcy filing. Typically, that is something that you will want the bankruptcy judge to decided.
- You are single and have a substantial amount of equity in your home. Since the home is thus not titled as tenants by the entireties, you will have no choice but to file a chapter 13 bankruptcy.
For some people a “Chapter 20 Bankruptcy” may be just what the doctor ordered.
The term “chapter 20” does not exist in the bankruptcy code, but is a nickname used by bankruptcy lawyers referring to the scenario where one files a chapter 7 bankruptcy, obtains a discharge, and then filed a chapter 13 bankruptcy not too long thereafter. Who would do such a thing?
- Are you a homeowner and sitting on a pile of debt? Are you way behind on your mortgage? Do you want a shot at qualifying for HAMP or some other type of loan modification from the bank? Then wiping out of all your unsecured debt via a chapter 7 bankruptcy filing will go a long way in qualifying for a loan modification on your home. If all else fails, you can file a chapter 13 down the road if the loan modification has not come through and you are still determined to save your home from foreclosure.