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With the economy at its lowest point in decades, many people are finding themselves out of work and facing foreclosures on their homes. Many more are unable to pay their monthly vehicle payments or credit card debt. Vehicles and homes are secured assets that can be taken by creditors; however, it is important to remember that credit cards are unsecured debt. This means that creditors cannot take any assets you may have purchased using credit unless the asset is a large ticket item such as a washer and dryer from a department store, for example.
Before you hire the services of a bankruptcy lawyer, you should have some idea about what type of bankruptcy remedy you are seeking. If you are a farmer facing reorganization in order to retain control of your land, you will have to find a bankruptcy lawyer that handles Chapter 12, also known as The Family Farm Bankruptcy Act. If you own a business, you will look for a bankruptcy lawyer that handles Chapter 11 reorganization that will protect your business and assets while you make arrangements to pay off existing debts. However, if you are a residential homeowner struggling to pay existing bills and overloaded with credit card debt that prevents you from meeting your obligations, then you will need to look for a bankruptcy lawyer that handles Chapter 7 or Chapter 13.
Chapter 7 or Chapter 13—Which to Choose?
Despite the new 2005 laws for Chapter 7, you may still qualify to simply walk away from your debts if you can pass the Means Test that your bankruptcy lawyer will give you. If you make too much money per month to qualify for Chapter 7, (as determined by your state) then your bankruptcy lawyer will probably suggest you file Chapter 13 instead. This means that you will still have to pay your debts, but at a reduced monthly rate through a trustee. Your bankruptcy lawyer will negotiate for a monthly payment that you can afford, and the trustee will pay your creditors directly until your account is discharged (paid in full). Your account will be “dismissed” if you fail to pay as promised and you will be open once again to the hounding of collectors.
While preparing your case, your bankruptcy lawyer will direct you to a site where you will have to take an online or by phone class on how to handle your money. After that, your bankruptcy lawyer will either meet you or send a representative to meet you at the court house where you will answer a series of questions before you are given your ruling. The process is relatively simple and your credit score should recover somewhere between the 580 to 650 range within 2 years depending on how well you pay your remaining bills during that period.