Just the thought of filing for bankruptcy can be a frightening thing. We are taught that bankruptcy is a bad thing and almost feel like we could never come back from it. However, sometimes bankruptcy can be the only option to get our heads back above water. Having credit cards or debt does not mean that you need to declare bankruptcy. So when is it necessary to do this? Let’s go over some information on bankruptcy.
The first thing you want to do is take a look at your situations. You have to ask yourself some hard questions such as our bill collectors bombard you? Are you using credit cards to pay bills and personal necessities? Do you even know how much you actually go? Does the thought of going through your finances overwhelm you? Do you only make the minimum payments on your credit cards always? Have you considered that consolidation? If you have to answer yes to more than two of these questions it’s time to think about your financial situation.
Bankruptcy is when you own more than you can ever afford to pay even if you liquidated all of your assets. If you were to empty your retirement fund and college savings and sell your house and vehicles would it still not be enough to pay for the debt you have accrued?
Deciding that bankruptcy is your only option is not a decision that should be taken lightly. However, once you have made that decision, from there you can go one of two ways.
The most common route is to file for bankruptcy voluntarily. The other way is if the creditors ask the court to order the bankruptcy. Getting a legal team together is beneficial for helping you figure out what the best decisions are for your circumstances. A bankruptcy attorney can advise you on the correct steps you need to make.
A chapter seven bankruptcy is filed for many reasons including unemployment, too many medical expenses, extremely overextended credit or marital issues. A chapter seven bankruptcy will liquidate all of your assets and pay off as much of your debt as possible.
A chapter 7 bankruptcy will stay on your credit report for 10 years. This is not necessarily a bad thing however, it often offers a fresh start for many people.
The disadvantage of the chapter seven bankruptcy is that all of the assets are taken and sold so if the debtor owns a business or a home that they want to keep a legal team may advise that a chapter 13 bankruptcy may be a better choice.
Chapter 13 bankruptcy allows people to pay off the debt over 3 to 5 years without having to lose certain assets. Chapter 13 offers a sort of grace period and at the end of that period any debt unpaid will be discharged.
Once bankruptcy is declared and approved by the court bill collectors and creditors must not contact the better.
Having said all this, before making any major decisions regarding your financial situation, sit with a legal team and let them help you decide what path will be the best one for you to take.