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Breaking down bankruptcy — what you need to know

If you are one of the many New York residents struggling financially, you have likely started looking into all of the debt relief options available to you. Some may not seem very realistic, and others may seem too good to be true — which means they probably are. At the end of the day, there is no quick fix or magic pill that is going to make everything better. Time, taking the right steps and hard work are the only things that can correct your situation.

Wondering how much time? Wondering what the right steps are? The truth is, it is different for everyone. For some, bankruptcy may be the best option, but there are different types of bankruptcy out there that work in different ways and run on their own particular timelines.

Bankruptcy basics

When it comes to personal bankruptcy, there are two basic types available to New York residents: Chapter 7 and Chapter 13. A Chapter 7 is known for its liquidation of assets. Does this mean you’ll have nothing in the end? No. You may have to sell some property in order to pay down debts, but some assets are exempt from the liquidation process. After paying down creditors through liquidation, if your petition receives approval, the court will discharge any qualifying debts — meaning you are no longer responsible for them.

A Chapter 13 bankruptcy is quite different from a Chapter 7. With this type of bankruptcy filing, the court will ask you to submit a payment schedule for consideration. If a Chapter 13 petition receives approval, you’ll have three to five years to pay off your debts in accordance with the approved payment plan. At the end of the payment term, discharge will come to any remaining debts that qualify for such.

Things you may not know

To qualify for a Chapter 7 filing, you must meet certain income requirements. If you make too much money, this is an option that may not be available to you. Not all debts qualify for discharge in either type of bankruptcy — such as alimony, certain tax debts and child support. A bankruptcy filing, if approved, will impact your credit rating, though, and with time, you can increase your score. Finally, it does cost money to file bankruptcy — there are court fees and attorney fees.

Bankruptcy can be a complicated process to get through, and it can take time — usually a couple of months. When all is finished, though, if you take the right steps, you may achieve petition approval and the financial relief you desire.

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