Have you decided to file bankruptcy in Duluth, Minnesota, but are unsure which type of bankruptcy is right for you?
First, congratulations on taking the first step towards financial freedom!
Second, let the experienced Bankruptcy Attorneys at Kain & Scott help you find the debt solution that works for your family. We have compiled some basic bankruptcy information to help you make a smart decision regarding your financial future. Let us walk you through the basics and then contact our office to get started on our easy 4-step bankruptcy process!
There are several types of bankruptcy cases. We will discuss two of the most common: Chapter 7 Bankruptcy and Chapter 13 Bankruptcy.
The first bankruptcy option is Chapter 7 bankruptcy. A Chapter 7 bankruptcy is the most popular because it allows you to wipe your financial slate clean. In a Chapter 7, you don’t make any payments back to creditors; instead, you push a reset button and get your life back immediately!
The second common bankruptcy option is a Chapter 13 bankruptcy. A Chapter 13 bankruptcy is a debt solution in the form of a repayment plan where you make payments, based on what you can afford, and at the end of a 3-5 year plan, whatever unsecured debt is not paid off (which can be most of your debt) gets wiped out, tax free, forever!
Generally, deciding between filing a Chapter 7 or Chapter 13 bankruptcy depends on a few key factors:
- Your income and expenses;
- Whether you are behind on mortgage or auto payments;
- The age and amount of any back taxes owed;
- Your student loan debt
Let’s look at each factor more closely:
Income and expenses
What type of bankruptcy you file is largely determined by your income and expenses. Your ability, or lack thereof, to repay your debts based on your income minus your expenses will determine which bankruptcy is right for you. Generally, Chapter 7 bankruptcy is most appropriate for people who have little to no disposable income, while those in higher income brackets will likely be required to file for Chapter 13.
Mortgage or auto payments
The amount of your outstanding mortgage or auto payments, your desire to keep or sell your home or car, and your ability to make payments to your debtors will all influence which type of bankruptcy you file. Worried that you will automatically lose your home or car if you file bankruptcy? Don’t be! In both a chapter 7 and chapter 13, all your assets and debts get listed on the bankruptcy but if you want to keep your car and home you just continue to make payments on them like you are now.
Clients who owe back taxes sometimes assume that they are stuck with that debt forever – this may not be the case! Although the general rule is income taxes are not dischargeable in a bankruptcy, there are exceptions to this rule if the taxes are old enough. And, in a chapter 13 bankruptcy, you don’t pay any of the penalties on the taxes that you do repay.
Many clients have significant student loans that they have fallen behind on. Student loans often make up a large portion of outstanding debt. Unfortunately, the general rule is that student loans are not dischargeable in a bankruptcy. But, it is possible to get caught up on your student loans by lumping them into a repayment plan through filing a Chapter 13.
The only way to discharge student loans in bankruptcy is to sue the student loan companies in bankruptcy court and ask the judge to issue an order including the student loans in the bankruptcy discharge because to repay them would cause you an undue hardship. This is very expensive to do and unlikely to succeed in most cases- unless the judge finds undue hardship.
There are ways to hold off student loan companies from collecting from you. We can
do this by filing a chapter 13 bankruptcy for 3-5 years.
Duluth, Minnesota residents can become debt-free with Kain & Scott
At Kain & Scott, we understand that deciding between a Chapter 7 and Chapter 13 bankruptcy can be a stressful and overwhelming experience. Our team of experienced Duluth Bankruptcy Attorneys can help you decide which bankruptcy is right for you and get your case filed within days to get you debt relief faster! To learn more about how Kain & Scott can help your family and to receive your free consultation, contact us online at www.kainscott.com today!