I can't pay my debts. Do I need to file for bankruptcy?
Maybe, but maybe not. Filing for bankruptcy isn't easy or free, and you may not need it. A bankruptcy stays on your credit report for 10 years. An overdue account stays on your record for less time. But, if you need to save your home from foreclosure, you may have to file for bankruptcy. Whether you need a bankruptcy depends on what kind of debts, property and income you have, as well as other things. It is best to talk to a lawyer before you decide to file.
Don't I need to file for bankruptcy to keep my creditors from suing me?
I'm going to file for bankruptcy and I've heard there are different kinds. What kind of bankruptcy should I get?
That depends. There are 6 different kinds of bankruptcy. For individuals, the 2 most common kinds of bankruptcy are:
"Chapter 7" - This is called "liquidation" because your unprotected (non-exempt) property is all sold ("liquidated") and the money used to pay off your creditors. You would only have to sell your car or your home if they were secured to pay debts. Your debts are discharged in Chapter 7 bankruptcy and you don't have to pay anymore on them. There's lots more to know about getting a Chapter 7 bankruptcy. To learn more, click here.
"Chapter 13" - This kind of bankruptcy is for people with steady income who want to adjust their debts. You have to agree to a repayment plan. Chapter 13 is better than 7 because you can save your home from foreclosure. To get a Chapter 13 bankruptcy, you'll need to show that you: 1) have a steady income; 2) can pay your unsecured creditors more than they would get under a Chapter 7 bankruptcy; and 3) can meet all your living expenses and still have enough money to pay the bankruptcy court and the back payments owed to your secured creditors. But there's lots more to a Chapter 13 bankruptcy. To learn more about it, click here.
Businesses that want to keep operating would normally file a Chapter 11 (reorganization) bankruptcy. For more information about that, click here.
Family farmers and family fishermen may need to get a Chapter 12 bankruptcy. Click here to get more details about Chapter 12 bankruptcies.
Municipalities (cities, town, villages, school districts, and so on) get what's called a Chapter 9 bankruptcy. For more information about that, click here.
When laws of another country also apply to debtors or property, a Chapter 15 bankruptcy may be needed. Click here for more information about that.
You're talking about "secured" and "unsecured" debts - what does that mean?
Your debts are either "secured" or "unsecured." It's important to know the difference if you're thinking about bankruptcy.
To learn the meaning of other words that creditors, lawyers and courts use when talking about debt or bankruptcy, click here.
Since most of your debt is unsecured and the mortgage company hasn't sent you a default notice, a Chapter 13 bankruptcy may not be your best choice. But, it's always best to talk to a lawyer who can go over your whole situation.
Do I need a lawyer to file for bankruptcy?
You might. You can talk to lawyers to find out. Most private lawyers will talk with you for free to find out if they want to take your case. Also, you might be able to get a free lawyer from a local legal aid or pro bono program. Many of these programs handle lots of bankruptcies. If you do get a lawyer, ask about their experience. It's better to use a lawyer who has handled a lot of bankruptcies.
I'm in the military. Do I get any special help in bankruptcy because I'm a servicemember?
The law covers different things. But the main difference between the old and new law is that if you are at or above Louisiana's median income level (about $31,000 in 2005), you may have to meet what is called a "means test" which would force you to re-pay some of your unsecured, non-priority, debts such as credit card bills, signature loans, or medical bills.
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