When to Consider Bankruptcy 

Facing financial challenges can be extremely overwhelming, especially if you’re attempting to make progress but the debts just keep piling up. Just know that many have been where you are, and exploring the option of bankruptcy could be a crucial step toward a fresh financial start. 

Who should be considering Bankruptcy? 

There are many reasons why people file for bankruptcy, from job loss, medical bills, divorce, or other life situations that put your finances at risk. If in these situations you are in danger of losing your home or having to use credit cards as a last resort to pay your bills (or other credit cards) then you should consider bankruptcy. It can not only secure your assets but also save you from the nagging of creditors who may start to grab at assets and take money from your bank accounts. 

There are two types of Bankruptcy; Chapter 7 and Chapter 13. Chapter 7 is for individuals and Chapter 13 is aimed more toward small businesses and in some individual cases. 

Chapter 7 Bankruptcy 

Chapter 7 bankruptcy is the most common type of bankruptcy that people file, often referred to as a “straight bankruptcy” or “liquidation” It allows individuals to sell their assets under the court’s supervision, in a chapter 7 bankruptcy almost all the debt is taken care of. Some personal items and property are exempt from bankruptcy proceedings. These generally fall under the heading “necessary to live.” Very likely, a person’s car or house will be exempt along with personal items and electronics needed for their job. Around 90% of Chapter 7 filers stay in their homes. Although most debts can be taken care of in Chapter 7. There are a few that can’t be discharged. “Taxes, student loans, secured debt, child support or alimony are at the top of the list of debts that usually cannot be erased through bankruptcy.”

A Chapter 7 bankruptcy is usually completed or discharged in four to six months.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is aimed at small businesses and in some individual cases, it results in a court-approved plan for you to repay all or part of your debts in a period of three to five years. Some debts might be discharged as well. However, in Chapter 13, you would hand over your accounts to the court for them to determine how much you will pay your creditors over your term. You will also be living on a very strict income and any disposable income will be used to pay off your debts. The main advantage of Chapter 13 is that it keeps home foreclosure off the table as Chapter 13 stops foreclosure proceedings.

Thinking about filing for bankruptcy? Attend one of our free bankruptcy clinics and get all of your bankruptcy questions answered.   

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