In Brooklyn and across New York City, financial woes are increasingly common. Given the recent national crisis and the accompanying medical costs, business shutdowns and ongoing fears about the economy, people from all walks of life have been affected. If you are wondering how to get out from under massive debt and are fearful about bankruptcy, I can give you the facts. There are misplaced stigmas surrounding bankruptcy that should be ignored when making an objective decision about it. First, it is useful to know which bankruptcy chapter is suitable for your situation.
Chapter 7 vs. Chapter 13: Which is better for me?
When choosing to file for bankruptcy, people generally need to choose between Chapter 7 and Chapter 13. Knowing the difference is imperative. The primary difference is that with a Chapter 7, people will liquidate their assets to clear all debts and with Chapter 13, they are making monthly payments to a trustee for three or five years.
Under Chapter 7, despite the term “liquidation,” you might not need to worry about losing certain properties if they are below a specific value. For example, an older car would not be taken. For items that are valuable and can be converted to cash, they will be sold and used to pay back creditors. Many properties will be considered exempt so you do not need to think about losing them. A successful Chapter 7 filing will discharge debt like credit cards and medical bills.
With Chapter 13, people who own a home and other valuable properties can retain them. This is generally for “wage earners” who have a job and consistent income. It is essentially a consolidation loan to reduce the payments they are making and eliminates the debt once the plan is complete. If you have a job, a home and are dealing with massive debt that you are wondering how you will pay each month, then Chapter 13 will likely be preferable to Chapter 7.
Help with debt relief
Bankruptcy can help with clearing debt, stop the endless calls from creditors and be a step toward rebuilding credit. Whether that means a Chapter 7 liquidation or a Chapter 13 repayment plan depends on the circumstances.
Whether it was due to unexpected medical bills, job loss, overextending on credit cards or for any other reason, bankruptcy can be an effective strategy. A skilled bankruptcy attorney can provide support, and help clients analyze solutions instead of focusing on problems. This is key to get beyond life’s most difficult moments.