On behalf of Law Offices of Mark M. Kratter, LLC on July 19, 2012
When filing for bankruptcy in Connecticut, it's important for consumers to understand the types of bankruptcies available to them and which suits their situation best. Bankruptcy laws exist to help people who have staggering debt, but also to help creditors they owe. Filing for bankruptcy can be confusing, especially since laws can be complex and vary between states; however, going into it with some understanding of the types of filings available can be helpful to everyone.
There are two types of bankruptcies most people are familiar with: Chapter 7 and Chapter 13. There are major differences between them, and qualifying for one or the other depends on your unique financial situation. Chapter 7, also known as "straight bankruptcy," is a much quicker process than Chapter 13.
Chapter 7 can be completed in only a few months and tends to be for people who possess few assets and relatively little or no income left once basic living costs are paid for. Qualifying for Chapter 7 will mean that any nonexempt property must be surrendered. The property will be sold and the proceeds applied to creditors. Leftover debts, with some exceptions, are then discharged.
Chapter 13 works differently and is generally for those who possess assets they would like to keep, including some income and home equity. A payment plan is established, typically for three to five years, which will allow you to become current on delinquent bills. The plan and its implementation must be approved by the bankruptcy court. As with Chapter 7, there are some debts that can be completely modified or discharged.
Some debts will not be discharged in bankruptcy and can include overdue child support payments and many student loans. Filing for bankruptcy will affect one's credit and could impact several things, including one's job or ability to purchase life insurance. A Chapter 13 bankruptcy will affect someone's credit for seven years, whereas a Chapter 7 filing will affect it for 10.
Despite the credit impact, filing for bankruptcy can be a good decision for many Connecticut residents. It allows someone the freedom to discharge most of their debts and often allows them to keep some of their property. Choosing bankruptcy protection offers a structured and protected means of confronting debt that has spiraled out of control, while laying the groundwork for a return to financial stability.
Source: The Commercial Appeal, "Better Business: Before seeking bankruptcy, understand your options," Randy Hutchinson, July 7, 2012
