Amid the global pandemic, many people are finding themselves without employment. When unemployment is ongoing, it is easy to fall behind on payments, which can quickly lead to financial stability. And when debt continues to grow, bankruptcy might be a good option for you.
Whether you file for Chapter 7 or Chapter 13 bankruptcy, knowing what to expect is highly beneficial. The following questions and answers will shed some light on the process so you can make the best decisions for your case.
Who can file for bankruptcy?
While the process is traditionally started by the person or business in debt, it can also be initiated creditors to whom the outstanding debt is owed. In this case, the debtor can contest the filing if he or she believes it is not necessary. Along with individuals, different types of businesses (such as corporations and partnerships) can also file for bankruptcy. Married couples can also file together, which is known as a joint petition.
Are there different types of debt?
Secured debt is debt that is backed by collateral. A car loan is a type of secured debt since there is a vehicle that can be repossessed if the loan is not paid off. Conversely, unsecured debt is not backed by property. Credit cards, student loans, medical bills, and money owned to utility companies are all considered unsecured debt. Some types of debt are prioritized above others. This includes things like child support or alimony, which will need to be paid first before other debt can be settled.
What is an automatic stay?
Once your bankruptcy claim is filed, creditors must cease and desist on collection attempts. This is known as the automatic stay, and creditors who go against this order will face legal reprisal. There are exceptions, however. If you have filed for bankruptcy more than once in a single year, the automatic stay may not apply or the time of protection may be decreased.
Which debts can be discharged?
While Chapter 13 is a debt reorganization plan, Chapter 7 allows for most debts to be discharged. In addition to the domestic payments listed above, taxes, student loans, personal injury damages, and fines typically cannot be discharged. Additionally, debts that are not listed in your filing also will not be discharged, which means they will need to be paid in full.