A person who’s drowning in debt might wonder how they will ever be able to make ends meet. One answer for this is to file for bankruptcy protection, which gives you a fresh financial start.
Connecticut laws set forth various points that you need to remember if you’re considering taking this step. Just remember that the sooner you act, the sooner you can enjoy peace from creditors’ collection attempts.
Types of bankruptcy
One of the first things you need to determine is what type of bankruptcy to file. Individuals usually file a Chapter 7 or 13.
The Chapter 7 bankruptcy liquidates your assets but doesn’t require you to make payments. Certain assets are exempt from this. For example, $75,000 of equity in your home for a single person or $150,000 of equity for a married couple are exempt from liquidation by the bankruptcy court. There are also personal property exemptions.
A Chapter 13 bankruptcy requires you to make periodic payments to the bankruptcy court. These payments usually last three to five years.
How debts are handled
Debts are divided into two types: secured and unsecured. While there are some exceptions, property that’s part of a secured debt will be repossessed by the creditor. It’s possible for creditors to provide you with an option to retain the secured property, so be sure you carefully consider the option if you’re interested in keeping the property.
Unsecured debts, which include things like credit card debts, are included in the bankruptcy process because there’s nothing for the creditor to repossess.
Not all debts can be discharged
There are some debts that can’t be discharged as part of the bankruptcy. This includes most tax debt, child support arrears and many student loans. Those are all unsecured debts, but they aren’t included in the bankruptcy. Discuss your case with someone familiar with these matters so you can ensure you understand how your debts and assets are affected.