Should You Consider Bankruptcy?
At one time or another, most of us have felt the weight of debt. Usually, it’s manageable; we can slowly pay off what we owe and get back on track. But sometimes, life pitches a curveball, maybe it’s a job loss, reduced income, or a medical condition, and all of a sudden, debt becomes an overwhelming monster. If you’re in such a situation, bankruptcy might be a way out.
What is Bankruptcy, Exactly?
Simply put, bankruptcy is a legal way to sort out your debts while treating your creditors fairly. You might have heard the terms “liquidation” or “reorganization”. These are the two main types of bankruptcy for individuals and couples. Both types serve to help you wipe the slate clean and start fresh. If you’re struggling with debt, you might want to talk to a bankruptcy lawyer.
Different Kinds of Bankruptcy
Most people pursue one of two types of bankruptcy. Knowing a bit about both can help you decide what’s best for you.
The first type is Chapter 7, or liquidation bankruptcy. It’s quicker than other types; you might be done in roughly six months. Here, some of your non-exempt assets (stuff you own that isn’t protected by bankruptcy laws) are sold to pay back your debts.
The second type is Chapter 13, or reorganization bankruptcy. This is a good choice for homeowners at risk of foreclosure. In this case, you’ll work out a repayment plan approved by the court.
Is Bankruptcy a Good Choice for You?
If you’re drowning in debt, you might feel like there’s no way out. But bankruptcy can be a lifeline for some people. Here’s what to think about:
– Are you using credit cards to try and settle your debt?
– Is your savings account drying up because of what you owe?
– Do you owe mostly on credit cards and hospital bills?
– Do you understand all your bankruptcy options?
– Are you ready for your credit score to take a hit and deal with potential credit approval difficulties?
– Can you commit to managing your money better?
If you answered ‘yes’ to these questions, bankruptcy might be a good option for you. Bear in mind though, it won’t wipe out all types of debt, for example, student loans. To make a smart choice, you’ve got to really understand all the ins and outs of bankruptcy.
What Steps Should You Take?
If you decide to go this route, it’s important to do things right. Many folks find it useful to hire a bankruptcy lawyer. A lawyer can help ensure your paperwork is error-free and filed on time, neutralizing potential hitches and reducing chances of being denied. Gather all your loan and asset information to help your lawyer determine the best form of bankruptcy.
Final Thoughts
Bankruptcy may be looked down upon socially, but there’s no shame in using this legal option if you’re drowning in debt. The key is to be well-prepared for the process, to make it as smooth as possible.