Should I File For Bankruptcy?
What You Need to Know Before You File Bankruptcy
Dealing with financial problems can be burdensome and overwhelming. Sometimes, declaring bankruptcy is the best solution to be free from your debts and to get a fresh start in life. Financial circumstances can be different for each individual, and the ins and outs of bankruptcy can be complex. There are some things that you need to know before you file for bankruptcy, like knowing which type of bankruptcy to file, when to file bankruptcy, or how bankruptcy can affect your credit.
Should I file for bankruptcy in Oregon?
A good bankruptcy lawyer can also assess your situation, and give you legal advice about your financial situation. At Michael D. O’Brien & Associates, P.C., we have extensive experience in dealing with debt and solving financial hardships. Our experienced Portland bankruptcy attorneys can help you with your debt problems and provide you with bankruptcy solutions or debt alternatives to solve your financial problems.
What is Bankruptcy?
Sometimes, we experience unexpected problems in life — sudden loss of a job, sickness, foreclosure — that can squeeze our budget tight and make debt pile up. Without a safety net, you and your family may face a rather difficult financial situation.
Bankruptcy can provide a solution to your financial problems by giving you the opportunity to get back on your feet while dealing with your creditors. After bankruptcy, debtors can get financial relief and a fresh start.
Bankruptcy usually falls under two categories: liquidation and reorganization. In a liquidation bankruptcy, you must give all your non-exempt property in order to wipe out your debts. While in a reorganization bankruptcy, you’ll be required to structure a repayment plan that will show how you can pay off all your creditors in 3-5 years’ time.
Different Types of Bankruptcy
Chapter 7 Bankruptcy
Chapter 7 is a liquidation type of bankruptcy, where you’ll be given a fresh start after most of your debts have been discharged. Once you declare a Chapter 7 bankruptcy, the bankruptcy court will issue a “bankruptcy discharge order.” Once this order is issued, creditors and debt collectors will be prevented from collecting debt that has already been discharged. Unsecured debts, or loans that are not backed by collateral or a guarantor, will also be discharged. This includes:
- Unpaid medical bills
- Credit card debt
- Old tax debts
- Unpaid utility bills
- Personal loans
- Car loans
However, there are some debts that can’t be erased in a Chapter 7 bankruptcy. These are called non-dischargeable debts which include:
- Spousal support or alimony
- Child support
- Recent tax debts
- Student loans
Secured debts, or debts backed by collateral, are debts that can’t also be discharged if you choose to keep the property. Mortgage loans and secured car loans are examples of secured debts.
To know more about Chapter 7 bankruptcy, talk to our Portland bankruptcy lawyer today.
Chapter 13 Bankruptcy
Chapter 13 is a type of reorganization bankruptcy where you’ll be required to do monthly payments to your bankruptcy trustee to repay your debts in a span of three to five years. Also known as the “wage earner’s plan,” the petitioner must make a debt reorganization plan that will work based on their monthly income. Car loans can also be modified in Chapter 13, and a house foreclosure can be avoided by paying your loan 3-5 years’ time.
If you want to keep your assets and properties, then Chapter 13 might work for you. Our legal experts in bankruptcy can help you design a repayment plan that will work for you. Call us at 503-852-9047 for more information.
Chapter 11 Bankruptcy
Chapter 11 is another type of reorganization bankruptcy. With chapter 11, small businesses can restructure and eliminate debts in order to continue business operations. In general, chapter 11 can be risky, complex, and time-consuming. However, Chapter 11 is great for businesses seeking to restructure if they’re owned by a partnership, corporation, or a limited liability company.
Chapter 11 is also great for individual business owners who want to reorganize their debts but fail to meet Chapter 13’s eligibility requirements.
Once you declare bankruptcy, the automatic stay will immediately take effect. This will protect debtors against most collection efforts while a bankruptcy case is still ongoing. It will also prevent foreclosures, car repossessions, wage garnishments, or your utility bills from being cut. However, certain obligations, such as child support or alimony, can’t be prevented by an automatic stay.
When filing for Chapter 7, you’ll be required to take the means test to determine whether you have enough “disposable” income to pay your debts. Its intended use is to limit the use of Chapter 7 to those who really can’t repay their debts. Although it was designed to restrict the number of debtors who can get their debts forgiven through a Chapter 7 bankruptcy, most people who take the means test pass it easily.
Specific monthly expenses will be deducted from your monthly income to determine your monthly disposable income. The higher your discretionary income is, the less likely you are to be qualified for Chapter 7. If you fail the means test, you’re expected to use your disposable income to repay your creditors through a debt reorganization plan. If you also want to retain certain assets, like your house or car, then you may also choose Chapter 13 to restructure your debts.
Only bankruptcy petitioners with consumer debts are required to take the means test. The first step is to determine whether your income is more or less than Oregon’s median income. If your income is more than the median income, then you must determine if you’d still have enough income left to repay your debts after subtracting your monthly expenses.
In a process that can be expensive and complex, the means test will determine whether you’re eligible for Chapter 7 bankruptcy or confined to Chapter 13 or Chapter 11. Talk to one of our bankruptcy lawyers in Portland today to know how you can take the means test.
How Bankruptcy Affects Your Credit Score
Different types of bankruptcy will have different effects on your credit score. For Chapter 7 and Chapter 11 bankruptcies, it could stay on your credit report for up to 10 years and up to 7 years for Chapter 13.
While it is true that a bankruptcy can remain on your credit report for up to 10 years, rebuilding credit after bankruptcy is not impossible. Once the bankruptcy process is over, you can slowly start improving your credit score by taking on credit in small amounts and paying them on time. That way, your credit will start to improve, and creditors will open their doors to you once again.
Consult with a Portland Bankruptcy Attorney Today!
Bankruptcy may seem intimidating at first, but our Portland bankruptcy law firm is here to help. We will help you deal with your financial problems and give you the best bankruptcy solution or debt alternative for your situation. Call us today for a free consultation.