Struggling with bills, debts, and collectors can be overwhelming. You may feel like you’re drowning in debt. You may feel like all you do is think about bills, talk about bills, and pay bills. In some cases, it may be impossible to get ahead of all of the bills you need to pay. When you’re dealing with unforeseen circumstances such as job loss or medical issues, finding ways out of debt can be quite challenging. If you are at the point where creditors keep calling and you’re struggling to make payments, it might be time to consider bankruptcy.
Regardless of your personal situation, there are a number of bankruptcy options available that may be appropriate. Understand that the type of bankruptcy you declare will based on the amount of debt you have, as well as on your ability to pay back the debt. If you file for Chapter 7 bankruptcy, you will generally be required to either sell off assets, or more commonly “buy back” your assets at yard sale prices, in order to pay at least a portion of your debts. The rest of what you owe will most often be eliminated when you file. However, some debts like student loans or child support may not ever be dischargeable in bankruptcy. Chapter 13 bankruptcy, on the other hand, enables you to keep more of your assets; however, you will have to pay back part of what you owe to debtors.
No matter what your personal financial status looks like, it’s important to consider both the pros and cons of filing for bankruptcy before you finalize your decision.
One of the biggest reasons to consider filing for bankruptcy is that it gives you a chance to have a fresh start. If you have been drowning in debt, you may feel like you don’t have any other choice but to file. It’s important to understand that bankruptcy is a reasonable option that can give you the opportunity to reclaim your life without constantly living in fear that another bill will be due or that another debt collector is going to call you. As soon as you file for bankruptcy, you’ll benefit from what is called an automatic stay. This means that lenders will no longer be able to request payment from you while you are in the process of filing. It will also put a stay on any foreclosure proceeding or wage garnishment. This puts an immediate halt to the stressful factors causing you to consider bankruptcy, and gives you a chance to get on top of your situation.
Another benefit of filing for bankruptcy is that it gives you a greater chance you to stop living paycheck-to-paycheck and start moving forward, saving money, and reaching your new goals. For some families who are struggling financially, it’s impossible to get ahead without removing the burden of debt through bankruptcy. Despite the negative stigma associated with bankruptcy, many bankruptcy filers immediately see a 20-30 point boost to their score just from filing. Credit companies are happy to know that you are being proactive about your debt, and your score can reflect this. For people with many negative marks on their credit record, a bankruptcy can actually remove all that negative treatment. The only negative treatment listed after a bankruptcy will be the bankruptcy itself. This is oftentimes less worrisome than a credit report containing many negative marks but no bankruptcy. Many bankruptcy filers through discipline and fiscal responsibility are able to bring their credit scores up into the 700 range within a few years of filing for bankruptcy. It pays to be proactive about your debt.
Filing for bankruptcy is not for everyone and it does have its downsides. Before you meet with an attorney to discuss filing for bankruptcy, make sure you understand exactly how this will decision will look for you. A bankruptcy filing can be helpful in some cases; however, for other adults, it’s not the right decision.
One of the biggest drawbacks to filing for bankruptcy is that it does impact your credit. If you want to buy a house, take out a large personal loan, or even buy a car, you may find that it’s difficult, although not impossible, for some time after filing for bankruptcy. This is because lenders will see that you filed for bankruptcy and may feel concerned about your ability to pay your debts.
In some cases, bankruptcy may not be the right choice if you have a large number of assets. This is because in some cases, bankruptcy requires you to sell a portion of your assets in order to pay down your debts. If you have a lot of personal belongings that you are not interested in selling or that you believe would not be beneficial to sell, it may be time to consider alternatives to bankruptcy. Depending on your asset to debt ratio among other factors, you may not actually qualify for bankruptcy.
Before you file, understand that a bankruptcy attorney can help assess your financial status and discuss your options with you. Whether bankruptcy is the right choice, or a different type of debt management plan is the best bet, your attorney can discuss your assets, debts, and goals with you and can assist you in creating a plan to help you move forward.