If you’re overwhelmed by debts and know that it’s more than a temporary situation, filing for bankruptcy might be your best option. Close to 800,000 individuals, business owners, and married couples filed for debt relief under Chapter 7 and Chapter 13 of the U.S. Bankruptcy Code in 2019. These questions and answers below may help you decide whether to take this legal step.

4 Questions Often Asked About Bankruptcy

What is bankruptcy?

Bankruptcy is how people admit insolvency and take legal action to address their financial problems. Filing a bankruptcy petition provides federal court protection from all creditor actions. An automatic stay stops repossessions, foreclosures, and utility cutoffs, allowing you to reorganize, reduce, and eliminate debts.  

What are the benefits of Chapter 7?

Generally, Chapter 7 bankruptcy wipes out debts without paying your creditors. Most filers receive their discharge of debts in four to six months from filing their petitions. This option works well for people with little or no income and high amounts of unsecured debts, such as credit cards, medical bills, and certain tax debts.

What are the advantages of Chapter 13?

Chapter 13 helps people who have reliable sources of income and want to keep valuable assets, such as rental property, a high-equity primary home, vacation houses, or motor vehicles. You submit a repayment plan the court must approve, and it runs for three to five years. Negotiating cramdowns with creditors reduces the total amount you have to repay. When the plan ends, the court discharges any remaining debt.

How long does bankruptcy stay on credit reports?

Chapter 7 stays on credit reports for 10 years from the date you file, while Chapter 13 remains seven years. The three national credit reporting agencies, TransUnion, Experian, and Equifax, remove the information automatically.        

If you are considering bankruptcy, get advice from the attorneys at Kratovil Law Offices, PLLC. Based in Charles Town, WV, these lawyers offer a full-service practice with more than 40 years of legal experience. Residents throughout the Eastern Panhandle consult them for filing bankruptcy, pursuing personal injury claims, and defending against DUI and drug charges. To schedule a free consultation, visit their website or call (304) 728-7718.