If you cannot stay on top of your debts, you may qualify to declare bankruptcy. There are several different types of bankruptcy, and the right option varies based on your situation. To help you determine which type of bankruptcy is right for you, here are five signs you should consider filing Chapter 13 bankruptcy.
1. You Are an Individual
To file this type of bankruptcy, you must be an individual. Businesses do not qualify for this type of bankruptcy. If you own your own business, you and the business are legally the same entity, unless the business has been established as a corporation. In that case, the business itself can declare bankruptcy, but it must use a different chapter.
2. You Want to Pay Back Your Debts
If you file Chapter 13 bankruptcy, you actually get assigned a payment plan by the courts and you get to repay some or all of your debts over the next three to five years. If you want to return the funds you borrowed to your creditors and can afford payments, this is probably the best option for you.
3. You Have Income
To ensure you can stay current with these payments, the bankruptcy courts will want to see that you have a steady income. Typically, you cannot qualify for this type of bankruptcy if you don't have income. Because of this arrangement, you may hear Chapter 13 referred to as the wage earner's bankruptcy.
4. You Are Not Insolvent But You Need Help
If you are completely insolvent and have no ability to pay back your debts, this is not the right type of bankruptcy for you. Instead, you may want to consider Chapter 7 bankruptcy. However, if you are not insolvent but you need help managing your debts, Chapter 13 may be the right option.
5. You Don't Want to Liquidate Your Assets
With Chapter 7 bankruptcy, you have to liquidate all your non-essential assets and use the funds to repay your creditors. You get to keep items you really need, but the list varies based on the laws in your state. For instance, in most cases, you can keep a moderate vehicle to get back and forth to work and for running errands, but if you have an expensive sports car, you will likely have to liquidate that.
In contrast, you don't have to liquidate with Chapter 13. You just have to agree to a payment plan as explained above.
To learn more about the right type of bankruptcy for your situation, reach out to an attorney today.