Making Financial Decisions During The Bankruptcy Process

During the bankruptcy process, you may be faced with a number of important financial decisions. These decisions can range from what type of bankruptcy you want to declare to whether or not you should keep your house. The decisions you make during bankruptcy can have a lasting impact on your future financial life, so it is essential you are educated about the ramifications of your choices and that you get help from an experienced bankruptcy attorney to guide you through the process of making these decisions.

Decisions To Make During Bankruptcy

The first and most important decision you may have to make is what type of bankruptcy you are going to file. You have two possible options, depending on your financial circumstances:

You can file chapter 7 bankruptcy

Under bankruptcy reform laws passed in 2005, this may only be a choice for some people. If you make below the median income in your state, or you pass a means test that determines your disposable income is below a certain level, then you can choose Chapter 7 as an option. However, if you make too much money, then you can no longer qualify and you must file Chapter 13.

If you do qualify for Chapter 7, then you have to choose if this is right for you or if you are better off filing Chapter 13. With a Chapter 7 bankruptcy, you must list your assets and all non-exempt assets are seized. Non-exempt assets include most of your possessions, with the exception of some of your home equity, retirement accounts and low-value vehicles. Your assets are sold by a bankruptcy trustee and the proceeds of this sale are distributed to creditors. After the proceeds are distributed, debts (with the exception of certain exempt debts such as student loans) are forgiven.

You can file chapter 13 bankruptcy

Those who make too much money to File Chapter 7 generally must file Chapter 13. For others who have the choice between the two, you may wish to choose Chapter 13 because you get to keep your possessions. However, your debt is not simply wiped clean under Chapter 13. Instead, you are put on a court mandated payment plan that lasts between 3-5 years. Over this time, you pay back at least a portion of the debts you owe, although many of your debts are restructured.

Other Choices

There are several other important financial decisions you will need to make as well:

You may need to choose whether to keep your house and try to get current on payments or whether to sell it
You will need to choose which bankruptcy attorney you will use to help you through the process.

Getting Help

Working with an experienced bankruptcy attorney is important as you make financial decisions throughout the bankruptcy process. Your attorney can provide you with guidance on how to best get your debts under control and how to preserve as many of your assets as possible. He can help you decide what type of bankruptcy to file and can take care of all relevant paperwork, forms and documents with the court to get your bankruptcy underway.

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