The Best Kind of Bankruptcy:
“You measure the size of the accomplishment by the obstacles you have to overcome to reach your goals.” ― Booker T. Washington.
A common question that I am asked as a bankruptcy attorney is “what is the best kind of bankruptcy?” It’s a complex question, and the best answer begins with deciding what you are trying to accomplish. We all know that filing bankruptcy helps eliminate debt but most people do not realize that there is more than one kind of debt. There are other factors to consider as well, such as do you have assets to protect, would you like to consolidate debts, and/or do you have a foreclosure or repossession you are trying to stop? With that in mind, let’s walk through some of the most common situations and what kind of bankruptcy is often best to solve those problems.
- Unsecured, Secured, & Priority: Know your debt! This is worth a blog by itself, so today we will keep it simple. Unsecured debts are usually your medical bills, credit cards, and balances owed after a repo or foreclosure. For secured debt, ask yourself, “If I don’t pay this, is there something they can come and take from me” (for example, If you do not pay your car note, they can repo your car; if you don’t pay your mortgage, they can foreclose on your house; or if they have a judgment against you, they can garnish your wages). If there is something they can take, then it’s a secured debt. Priority debt is recent tax debt or child support, among other things.
- If your problems are unsecured debt, a low income, and you do not have many assets, then Chapter 7 is usually the best kind of bankruptcy.
- If you need to consolidate debt by putting your debts together so that you can focus your payments on the most important items (secured debt), then Chapter 13 is usually best. For example, you might use Chapter 13 to lower the interest rate on a car or change the length of your car repayment plan to make the monthly payments more affordable.
- If you are trying to stop a foreclosure or repossession, then Chapter 13 is designed to help.
- If you have recent tax debt (priority debt) that you would like to pay over a long period of time to make the monthly payment manageable, then think Chapter 13.
- If you need to file bankruptcy but have significant assets to protect or higher income, then Chapter 13 is usually the better option.
Don’t feel overwhelmed; all of these are just options that we discuss when you come in and sit down for a free initial consultation. The more you understand how your bankruptcy works, the better chance of success you have in achieving your goals. Ask yourself what you would like to change or improve about your financial situation. That will answer the most important question: What are you trying to accomplish?
-fueled by Fogchaser coffee. When fully caffeinated, Charles Farrell Jr. can be reached at 229-474-6742 or at [email protected]