The civil courts can offer people relief in a variety of challenging circumstances. Judges can rule on contract disputes or award compensation to those injured by others. The civil courts also hear bankruptcy cases brought by individuals and businesses struggling with their financial obligations.
People who have overwhelming credit card debt or major medical bills might consider filing for personal bankruptcy. Bankruptcy can lead to the discharge of eligible debts. Bankruptcy also protects people from aggressive collection efforts. Choosing the chapter or type of bankruptcy to pursue is an important part of the process.
What are the options available for individuals seeking to address their major debts?
Chapter 7 bankruptcy
Chapter 7 bankruptcy is the fastest pathway to a discharge of eligible debts. Filers can go from the submission of the initial paperwork to a discharge of their eligible debts in a matter of months.
Chapter 7 bankruptcy is generally only available to people who pass the means test. They have to compare their recent income to the state median income for their household size. Those pursuing Chapter 7 proceedings typically need to provide a detailed inventory of personal resources to the courts. In some cases, asset liquidation is necessary as part of the Chapter 7 process. However, most filers can protect their assets from liquidation with the careful use of exemptions.
Chapter 13 bankruptcy
Sometimes, people with above-average income need relief from debt collection efforts. Other times, bankruptcy filers worry about preserving their resources from liquidation if they have assets they cannot exempt. Chapter 13 bankruptcy typically takes years to complete because of the mandatory repayment plan.
The filer has to commit a significant portion of their disposable income toward the repayment plan. After making between three and five years of payments, they can then discharge the remaining balance owed on their eligible debts. Chapter 13 bankruptcy can be particularly helpful for those who might require a loan or mortgage modification to make their financial circumstances more sustainable.
Selecting the right form of bankruptcy is an important step. People in need of bankruptcy relief may want to discuss their financial concerns with a professional familiar with bankruptcy filings and civil litigation in order to make truly informed decisions about their options.