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Determine Whether to File Chapter 7 or Chapter 13

Published on April 8th, 2022

When debtors have a bankruptcy lawyer in Springfield, IL, to represent them, they can receive guidance from a professional throughout the process. Filing for bankruptcy is a difficult decision to make. Once it’s clear that this is the appropriate next step, a firm like Pioletti Pioletti & Nichols can help to ensure the process is as straightforward as possible. Dealing with mounting debts and constant calls from creditors is highly stressful, and at times, bankruptcy is the logical next step. A lawyer can carefully review the situation to determine the most appropriate chapter of personal bankruptcy to file for so debtors can finally experience relief from creditors. Whether to file for bankruptcy is an important decision, but know that there is light at the end of the tunnel, and with the proper strategy, it’s possible to move forward and rebuild credit after a bankruptcy filing. 

Determine Whether to File Chapter 7 or Chapter 13

Debtors usually have two options when filing for personal bankruptcy, Chapter 7 or Chapter 13 bankruptcies. Determining the best way to proceed will involve a careful review of finances, the debtor’s ability to repay some of them, and the assets they are trying to retain control of. A lawyer will take the time to listen to their client’s needs to determine the most appropriate option. 

Chapter 7: is referred to as a liquidation bankruptcy. Our Springfield, Illinois bankruptcy lawyer will share that debtors who select this option must qualify by having an income below the state median, no prior bankruptcies in the last eight years, and engage in credit counseling. Under Chapter 7, debtors will have much of their unsecured debts discharged, allowing the slate to be wiped clean. While assets are liquidated to repay as much debt as possible, debtors can keep some exempt assets.     

Chapter 13: is often the most appropriate option with debtors who have a regular income and can pay off some of their debts. Also known as the “wage earner’s plan,” Chapter 13 is for those who do not qualify for Chapter 7 bankruptcy. Chapter 13 involves restructuring debts that the debtor will pay back over 3-5 years. It’s important to note this may be a preferred method for those who would like the opportunity to catch up on mortgage payments in an effort to keep their home. 

Understanding the Automatic Stay

One of the most stressful components of crushing debts that cannot be paid is the overwhelming calls from creditors attempting to settle these debts. The automatic stay takes effect when bankruptcy proceedings are initiated. When this occurs, creditors must halt all efforts to collect debts; this could include moving forward with property foreclosure or repossessing assets. 

How to Rebuild Your Credit After Bankruptcy

Bankruptcy can offer significant relief; however, one primary concern with pursuing the process is rebuilding credit after bankruptcy. It’s important to know that it’s possible to move forward when proper action is taken to make sound financial decisions post-bankruptcy. Depending on the filed chapter, a bankruptcy will remain on a credit report for 7-10 years. But, know that regardless of this, debtors should take action towards rebuilding their credit immediately. To initiate the process of rebuilding credit, consider doing the following:

  • Closely monitor your credit score
  • Consider a credit card with a low credit limit
  • Use the credit card for small purchases 
  • Pay the entire balance of the card off each month

Over time, debtors will begin to see their credit score bounce back after bankruptcy. However, it’s essential not to continue replicating the same behavior that resulted in bankruptcy in the first place. 

Pioletti Pioletti & Nichols can play a pivotal role in making decisions regarding bankruptcy and the proceedings to follow. For reliable legal counsel, reach out to our bankruptcy lawyer in Springfield, Illinois. 

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