Bankruptcy FAQ's

---

 Bankruptcy is a federal legal process designed to help individuals and families address overwhelming debt in an orderly and lawful way. Depending on the chapter filed, bankruptcy may allow a person to eliminate qualifying debts or repay some portion of their obligations over time under court supervision.

Bankruptcy is not simply about erasing debt. It is a structured financial reset that provides legal protections, including the automatic stay, which immediately stops collection activity such as lawsuits, wage garnishments, repossessions, and foreclosure actions.

 Chapter 7 Bankruptcy
Chapter 7 is often referred to as a liquidation bankruptcy. In many cases, it allows individuals to discharge most unsecured debts, such as credit cards, medical bills, and personal loans. Certain assets may be protected by exemption laws, and many Chapter 7 cases are completed without any property being sold.

Chapter 13 Bankruptcy
Chapter 13 involves filing a court-approved repayment plan, typically lasting three to five years. This chapter is often used by individuals who have higher income, wish to protect assets, or need time to catch up on mortgage arrears, car loans, or tax obligations. At the end of a successful plan, remaining qualifying debts may be discharged.

The appropriate chapter depends on income, assets, debt structure, and long-term goals.

Eligibility for Chapter 7 is influenced by income and household size under a statutory means test, but income alone does not always determine the outcome. Some individuals with income above the median may still qualify, while others may benefit more from Chapter 13 even if Chapter 7 is technically available.

Choosing the correct chapter requires evaluating:

• Income and household expenses
   
• Assets and exemption protection
   
• Secured debts such as homes and vehicles
   
• Non-dischargeable debts such as taxes or student loans
   
• Long-term financial objectives
   

An informed decision requires a complete review of the facts, not assumptions based on labels or general rules.

 While each case is different, most bankruptcy matters follow a similar framework:

Initial Consultation
The process begins with a consultation to review income, debts, assets, and goals, and to determine whether bankruptcy may be an appropriate option.

Required Credit Counseling
Federal law requires completion of a brief credit counseling course before filing. This is an educational requirement and is typically completed online.

Planning and Filing
Once a strategy is selected, the case is prepared and filed with the bankruptcy court. Filing triggers the automatic stay, which stops most collection activity immediately.

Court Oversight and Completion
Chapter 7 cases generally conclude within a few months. Chapter 13 cases involve ongoing payments under a court-approved plan. Throughout the process, compliance and communication are key.

Many individuals experience a sense of relief after filing, largely because collection pressure stops and a clear path forward exists. Bankruptcy can provide the structure needed to rebuild finances, address lingering obligations, and regain control.

Life after bankruptcy often involves credit rebuilding, budgeting, and financial planning, but for many people it represents a turning point rather than an end point.

There is no universal answer. Bankruptcy is not appropriate for every situation, and timing matters. That said, delaying action while collection activity escalates often reduces available options.

Bankruptcy is not a sign of failure. It is a legal tool created to address financial distress in a predictable and lawful way. Speaking with an attorney early can help determine whether bankruptcy is appropriate or whether other options should be explored first.

Bankruptcy law exists to provide relief, structure, and protection when debt becomes unmanageable. Understanding how it works is the first step toward making an informed decision.

If you have questions about bankruptcy or how it may apply to your situation, we invite you to contact The Tancredo Law Firm, P.A. to discuss your options and determine a practical path forward.