Debt piling on top of debt is never something you thought would happen. You were always so careful with your finances, but a string of medical problems has forced you to miss work. With the medical debt and loss of income, you have gotten into a deep hole. You are contemplating your options, but the one that you are most interested in is filing bankruptcy. Many myths surround the process and what it can and can’t do. Take a peek at some of the facts about the bankruptcy process.
The Differences Between Chapter 7 and 13
There are two primary ways to file bankruptcy for individuals, and both take very different routes. Chapter 7 bankruptcy involves liquidating assets to pay off debt. Chapter 13 requires the establishment of a negotiated settlement and payment plan between you and creditors. A trustee is appointed regardless of the filing type. The role of the trustee is to act as a go-between to get a favorable resolution.
Deciding Who Gets Paid and Who Doesn’t
Regardless of what chapter you file, there is a chance that not all your debts will get paid. Even a payment plan is limiting, so unless your debt is not tremendous, some creditors may be left recouping very little or nothing. As a bankruptcy lawyer Rockville MD can tell you, a notice is sent to creditors informing them of your filing. They then have a timeframe under which they can act to get themselves in line for payment. Secured debts or those with collateral like cars and homes are given priority. Unsecured debts, like credit cards, are last on the list. In both Chapters 7 and 13, the trustee helps negotiate the total balances down.
Being able to get out from under the pressure of debt may reduce your stress. It will also give you a chance to rebuild your credit and get back in good standing with the bureaus.