Coming to the realization that you can’t handle your debt load is a frightening event. Once you have made this determination, you have to decide what you are going to do to take control. You have a few different options to think about.
First, you can continue to struggle and try to keep on top of the bills. Second, you can stop paying the bills and face the possibility of collection attempts that might include a lawsuit. Third, you can file for bankruptcy and enjoy protections this federal program offers.
If you opt for the third option, you will have to determine which form of bankruptcy protection to seek. Here are some points you need to know about bankruptcy:
Different forms of protection
The different types of bankruptcy protections offered by the federal government are known as chapters. This term comes from the location of the bankruptcy type in the bankruptcy code. Chapter 7 and Chapter 13 are the two most common personal bankruptcy types. These provide similar protections, but the terms of each program are different.
Impacts on your assets
The chapter you file under has a direct impact on the assets you have. Assets under a Chapter 7 bankruptcy are likely to be taken and liquidated to pay off your debts. You might be able to keep more assets under a Chapter 13 bankruptcy. Assets like your home and vehicles will have to either be returned to the creditor or purchased at a wholesale price if you file for Chapter 7. You will likely be able to keep those if you file for Chapter 13 and are able to get the accounts current and keep up with the payments.
Your income is a factor
If you plan on filing Chapter 7 bankruptcy, you will have to take a means test. This test, which considers your income in relation to the mean income of Illinois helps to determine if you qualify for this form of bankruptcy. People who don’t qualify for Chapter 7, which liquidates your assets to pay debts, will likely have to file for Chapter 13 protection, which requires you to make payments on the balance of debts.
There are other considerations that might come into the picture for your case. When you are trying to determine which you are going to file, you should consider the ways that each option will impact you now and in the future.