Bankruptcy vs. Debt Settlement: Which Is Right for You?

Unsecured debts are a significant factor in most bankruptcy cases, often comprising the majority of an individual’s financial burden. Unlike secured debts, unsecured debts don’t have collateral backing them—meaning there’s no asset (like a home or car) that a creditor can repossess to recover what’s owed. Here, we’ll explore the nature of unsecured debts, how they are managed in Chapter 7 and Chapter 13 bankruptcies, and what individuals should consider before filing. What Are Unsecured Debts? Unsecured debts are those that are not tied to any specific property or asset. Common examples include: Credit card debt: One of the most prevalent forms, especially due to high-interest rates that can quickly compound. Medical bills: Often overwhelming due to high healthcare costs, especially if health insurance coverage is minimal. Personal loans: Includes loans from banks or credit unions, friends, and family members. Utility bills: Overdue bills for utilities, such as electricity, water, and internet services. Legal judgments: Financial obligations resulting from lawsuits that don’t involve specific property claims. These debts are generally dischargeable, which means that through the bankruptcy process, an individual can potentially eliminate their responsibility to repay them. Unsecured Debts in Chapter 7 Bankruptcy Chapter 7, often called “liquidation bankruptcy,” involves selling certain assets to repay creditors. However, most unsecured debts can be discharged, meaning they are wiped out completely at the end of the process. Here’s how it works: Discharge of Debts: Once you file for Chapter 7, the court will typically issue an automatic stay, halting all collections, phone calls, and lawsuits from creditors. When your case concludes, unsecured debts such as credit card balances, medical bills, and personal loans are usually discharged. Non-Dischargeable Debts: Not all unsecured debts can be discharged in Chapter 7. For example, student loans, child support, and some taxes remain payable even after the bankruptcy process. Means Testing Requirement: Chapter 7 isn’t available to everyone; you must pass a “means test” to qualify. This test examines your income and expenses to determine if your financial situation truly necessitates a Chapter 7 discharge of debts. Unsecured Debts in Chapter 13 Bankruptcy Chapter 13 bankruptcy, often called a “reorganization bankruptcy,” differs significantly from Chapter 7. Instead of discharging debts immediately, it involves a structured repayment plan over three to five years, allowing individuals to retain their property while managing their obligations. Here’s how unsecured debts are treated in Chapter 13: Repayment Plan: Unlike Chapter 7, Chapter 13 doesn’t immediately discharge unsecured debts. Instead, it sets up a repayment plan, where individuals pay a portion of their disposable income toward their debts over time. The court bases this plan on what you can realistically afford. Partial Discharge: At the end of the repayment term, remaining eligible unsecured debts may be discharged if you have completed the payment plan. This can relieve you of significant financial pressure, particularly if you owe substantial amounts in medical bills or credit card debt. No Means Test: Chapter 13 doesn’t require a means test, making it an option for individuals who might not qualify for Chapter 7 due to higher income. Key Considerations for Bankruptcy Filers Filing for bankruptcy can be life-changing, but it’s important to understand a few factors that may impact how your unsecured debts are handled: Automatic Stay Protection: Both Chapter 7 and Chapter 13 offer the automatic stay, which prevents creditors from collecting while your case is active. This protection can provide much-needed relief and breathing room as you move through the bankruptcy process. Impact on Credit: Both types of bankruptcy affect your credit score, but Chapter 13 remains on your report for seven years, while Chapter 7 stays for ten. This consideration may impact your decision based on your future financial goals. Non-Dischargeable Debts: Some debts, such as recent tax liabilities, alimony, child support, and student loans, are generally non-dischargeable in both types of bankruptcy. It’s crucial to discuss with your attorney which debts may or may not be affected before filing. Financial Fresh Start: Both Chapter 7 and Chapter 13 offer the opportunity to manage overwhelming debt and move forward with a clean slate. For many, this is an invaluable aspect of the process, enabling them to rebuild their finances and reduce stress.  Understanding unsecured debts and how bankruptcy affects them is essential to making an informed decision about your financial future. Consulting with an experienced attorney will help clarify whether Chapter 7 or Chapter 13 bankruptcy is the best option for your unique situation.

Filing for bankruptcy can provide much-needed relief if you’re overwhelmed by debt and facing potential loss of assets. Bankruptcy allows individuals to reorganize or discharge certain debts, protecting their property and giving them a fresh financial start. The team at Mark M. Kratter, LLC, a Connecticut-based law firm, has created a checklist to help you prepare. By following these steps, you’ll streamline the process and help your attorney determine your eligibility for bankruptcy. 1. Assess Your Eligibility To qualify for bankruptcy, you’ll need to meet specific criteria. The type of bankruptcy you file, whether Chapter 7 or Chapter 13, will depend on your income, debts, and assets. Generally: Chapter 7 is for those with limited income who need to discharge most debts. Chapter 13 is suited for individuals with higher income levels who can make regular payments toward debt under a structured plan. 2. Gather Essential Documents Providing accurate documentation is critical for your attorney to evaluate your financial situation. Use this checklist to gather what you’ll need: Tax Returns: Collect your most recent federal and state income tax returns. Income Records: This includes the last six months of salary stubs, direct deposit records, and any other income sources (such as rent, pensions, Social Security benefits, or alimony). Monthly Payment Bills: If you’re making monthly payments on any items, include the most recent billing statements. Insurance Proof: Have insurance records for all financed vehicles. Creditor List: List all creditors along with balances due. Retirement Statements: Include the latest statement for any retirement accounts, including IRAs and 401(k)s. Legal Agreements: Copies of recent divorce decrees, property settlements, or court orders for support payments. 3. Organize Your Financial and Property Records Your attorney will need to see a full picture of your financial and asset holdings to advise you accurately. Addresses: Note every address where you have lived in the past 36 months. Legal Documents: Gather any court documents, such as lawsuits filed or ongoing cases within the last two years. Major Sales Records: Include documentation of any significant sales or transfers within the last 24 months. Property Inventory: List all personal and real property. Property Tax Records: Include your most recent property tax assessments. Ownership Titles: Copies of all titles for assets you own or have a stake in. Business Tax Returns: If you own a business, include recent business tax returns. Retirement or Investment Transactions: Documentation for any liquidated retirement or investment accounts within the past year. Mortgage Statements: Copies of any mortgages and recent closing statements, if applicable. 4. Finalize Documentation with Your Attorney With all these records in place, you’ll be ready to meet with your attorney at Mark M. Kratter, LLC. Their skilled Fairfield County team will guide you through the process, file necessary documents, and help negotiate manageable payments or asset restructuring to set you on the path to financial health.  For personalized guidance, contact Mark M. Kratter, LLC, at their Norwalk, CT office at 203-678-8135 to get started on your journey to a fresh financial beginning.

Bankruptcy Often a Key Element in Connecticut Divorce

Connecticut Debt Relief Law Firm Teaches Clients that Filing for Bankruptcy is No Longer a Stigma Bankruptcy. The word carries with it so many different meanings for different people. For far too long, Americans have felt that because filing for bankruptcy was a last resort before total financial annihilation, it was therefore a humiliating process, one to be kept secret or hidden from friends and neighbors. But due to the difficult economy and recent economic recession, this perception is quickly changing.

Norwalk, CT Attorneys Help Students Pay Back Loans without Drowning in Debt Pursuing an education is an integral part of the American Dream. Getting a college degree in order to seek knowledge and fulfill one’s dreams is the right of every American citizen, and people come from all over the world desiring to pursue this freedom. However, the cost of this dream can be steep. Most students have to obtain loans in order to fulfill their desire for a college degree, and, unfortunately, due to the recession, the bleak job market, and high interest rates, most of these young people are struggling to pay them back.

Bridgeport Bankruptcy Law Firm Cautions Clients as to Effects of Sequestration No one likes to be in limbo—it is an uncomfortable feeling to be uncertain as to one’s future. For Americans undergoing the process of bankruptcy, limbo is very likely what they will be experiencing for the years to come. Sequestration, or long-term cuts to different areas of the US Government, is most likely going to result in both court services and the resolution of civil and criminal cases becoming backlogged, drawn out and an altogether frustrating process. If you have filed for bankruptcy, or are considering...

Bridgeport, CT Bankruptcy Attorneys Help Clients Rebuild Credit after Bankruptcy Although filing for bankruptcy has gotten a bad reputation, there is much good that can come of it. One positive aspect in particular is that it allows you to create a better credit score in your immediate future. With the help of the skilled and effective Connecticut debt relief attorney Mark M. Kratter, you can create a sound financial future for yourself, and your family.

Bankruptcy can allow people to wipe their financial slate clean when they are facing mounting bills, overwhelming payments, or steep mortgage installments that can no longer be paid – but it doesn’t always easily provide relief for those with large amounts of student loan debt. There are two major student loans: federal loans that are backed by the federal government, or private loans that are backed by for-profit banks. Private and government-issued or -protected loans have usually been non-dischargeable in bankruptcy proceedings. However, there are options. If student loans are weighing you down, contact the Bridgeport Bankruptcy Law Firm of Mark M. Kratter, LLC to help you figure out the process and begin anew.

The recent recession was having too high a cost: countless people in the state of Connecticut were losing their homes to foreclosure. As a result, the state came up with a solution to try and help people save their homes: mandatory foreclosure mediation.