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When Should You File for Bankruptcy?  

It is advised to file for bankruptcy when you or your family cannot pay the bills as they become due. If you think this is a temporary problem and can catch up soon, then filing for bankruptcy may not be necessary. But if you can’t afford to pay the bills and the problem persists, then you should consider filing for bankruptcy. When you fail to pay for several months, creditors will turn over the delinquent account to collection attorneys, who will start litigation to obtain a judgment. This usually occurs after five months to one year of payment delinquency.

By filing for bankruptcy, you will immediately be protected from creditors, and it will help eliminate or discharge most debts, including personal loans, credit cards, or hospital bills. You might be able to keep your house, cars, bank accounts, or other assets.

What to Choose: Chapter 7 vs. Chapter 13

Most people are afraid to admit they are bankrupt and continue to accrue even more outstanding debts. But you don’t have to be scared of filing for bankruptcy because it may be the most efficient solution to most debt problems.

Once you have decided to file for bankruptcy, you either file for Chapter 7, Chapter 13, or other debt relief solutions; however, these two are often the most advantageous.

Chapter 7

If you opt for Chapter 7, bear in mind that most of your debts will be wiped out, including your medical bills, personal debts, or credit card debts. However, Chapter 7 is not available for everyone since it has criteria that determine whether a client can or should file a case under Chapter 7. The main criterion is the client’s income level as determined by family size compared to the median income for a family of that size in Long Island. You should expect your income, deductions, and necessary expenses to be scrutinized in the six months before filing the bankruptcy case. If you want to qualify for Chapter 7, having negative disposable income under these checks is necessary.

Although it will affect your credit score, you will no longer have an obligation to pay these debts once you are granted a bankruptcy discharged by the court.

Chapter 13

On the other hand, if you choose to file for Chapter 13, you can keep all your properties, but only after you propose a repayment plan for some of your debts, depending on the case. Compared to Chapter 7, Chapter 13 does not have an official income or an unofficial asset value limitation. All dischargeable debts will be wiped out once you pay your debts entirely in a three to five-year plan. If these two options don’t suit your needs, you can still file for Chapter 11, which is designed to accommodate larger debt loads, usually filed by businesses for more significant cases.

By comparison, most debtors choose Chapter 7 as it is a faster process. Still, it is always recommended to discuss your options with a bankruptcy lawyer on Long Island to analyze your situation and take the best course of action. A bankruptcy attorney will also advise you to file for bankruptcy protection so that you can rebuild your credit rating.

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