Peter R. Scribner, Esq. ATTORNEY AT LAW
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Which is the right type of bankruptcy to get out of debt

The bills continue to pile up and each month requires tougher and tougher decisions about what to pay. This may be related to a illness or unexpected job loss or it could be incrementally falling further behind each month. Bankruptcy offers a financial reset and can put a stop to creditor harassment. 

There are two primary forms of bankruptcy for consumers, Chapter 7 and Chapter 13. Chapter 7, or liquidation bankruptcy, is usually faster than a Chapter 13 bankruptcy and gives you that fresh start quickly. However, it may require you to sell some of your assets to satisfy creditors.

Chapter 13 bankruptcy, on the other hand, is a repayment program. That means that you can repay a portion of what you owe over time, allowing you to keep your assets and possibly save your home from foreclosure.

How common are bankruptcies in the United States?

There were around 12.8 million consumer bankruptcies filed with the federal courts between Oct. 1, 2005, and Sept. 30, 2017. Around 68% of those filings were for Chapter 7 bankruptcy, while 32% were for Chapter 13.

How can you qualify to file for Chapter 7 bankruptcy?

To qualify for Chapter 7 bankruptcy, you will need to show that your income fell below the state median for the six months leading up to the bankruptcy petition or that your disposable income falls below the threshold established by a means test.

If you do not qualify for Chapter 7 bankruptcy, then you may qualify for Chapter 13 bankruptcy. Chapter 13 bankruptcy is designed to last up to five years and uses a portion of your disposable income to pay back the debts that are owed.

Certain states struggle more with bankruptcy than others

In 2016, the five states that had the greatest number of Chapter 13 bankruptcies were Mississippi, Georgia, Tennessee, Alabama and Louisiana. Across the nation, one in every 405 households filed for Chapter 13 protections. Overall, bankruptcies peaked just after the recession in 2010, and they have declined since.

Bankruptcies are not the only answer to financial problems, but they can be the right choice depending on the circumstances. If you are struggling with your finances, bankruptcy could be the right decision. It's not uncommon to choose bankruptcy, and though it will impact your credit, it also gives you a fresh start so that you can feel the relief of no longer having debts weighing you down.

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Peter R. Scribner, Esq.
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