bankruptcy lawyerDid you know that nearly half (43%) of American families spend more than they earn each year? Considering that the median household income is about $50,000 in the United States, the amount of debt families take on through credit cards, mortgages, and other methods of spending can have disastrous results for those who don’t live within their means.

When your spending greatly exceeds your earnings, and debt collectors are calling you day and night, it may be time to file for bankruptcy.

You may have seen information about bankruptcy on the news: companies go out of business from it, and even cities like Detroit have filed for municipal bankruptcy. Even Donald Trump, the billionaire real estate mogul, has filed for bankruptcy four times. For the average United States citizen with debt, however, you’ll have different questions and concerns. If you need to file for personal bankruptcy, the first step is to contact a bankruptcy lawyer.

For the average American with outstanding debts, there are two common types of personal bankruptcy that he or she will be likely to file: Chapter 7 and Chapter 13. These “chapters” refer to the types of Bankruptcy code located in Title 11 of the Code of Laws of the United States. Approximately 65% of bankruptcy cases in the U.S. are Chapter 7, as this tends to be the quickest and easiest way to settle bankruptcy.

Chapter 7 bankruptcy is also known as liquidation. The debtor’s assets are turned over to a court-appointed trustee and are liquidated, or sold, to pay back the debtor’s outstanding debt. As the debtor turns in his or her property to be liquidated, he or she may face some discharge of debts. This only occurs, however, if the debtor is not found guilty of concealing financial records or having particular types of debt, such as spousal or child support payments or student loans. Certain goods, such as clothing, household goods, and older cars, are considered “exempt” and do not have to be surrendered. By working with a bankruptcy lawyer and filing Chapter 7 bankruptcy, a debtor can ensure this process runs smoothly.

So what is Chapter 13 bankruptcy? Chapter 13 bankruptcy is also known as a form of debt consolidation. Sometimes, those who file for Chapter 7 will be put through a “means” test, meaning that your income must be sufficiently low enough in order to declare total bankruptcy. If it is not, then the case will become Chapter 13 bankruptcy, which is a form of debt consolidation. This type of bankruptcy is available for those whose debts do not exceed a certain amount, and Chapter 13 bankruptcy orders debtors to pay back their debts with a portion of their income.

Bankruptcy lawyers will work with you through each step of this process to ensure that you follow the bankruptcy ruling according to the law, so you do not face higher fines or taxes for failing to report all of your assets. It is common for a debtor’s credit rating to suffer after a bankruptcy filing; however, the debt and financial circumstances that result in bankruptcy have likely already negatively impacted your credit score. It is better, though, to file for bankruptcy than continue to add to the debt. Talk with a bankruptcy lawyer today to see what you can do to repair your finances.