If you’re struggling with overwhelming balances on your credit cards and other debts, know that filing for bankruptcy may be able to help you regain your financial footing.
Many people used to be afraid of bankruptcy because it was attached to a stigma. Thankfully, since the Great Recession of 2008, that stigma has all but disappeared. As a result, if you’re struggling with debt, seek information about the process so that you can make informed choices about your options free from fear.
What is Chapter 7 bankruptcy?
Chapter 7 bankruptcy is the most popular form of bankruptcy-related debt relief. Chapter 7 bankruptcy is called liquidation bankruptcy because debtors may have to use assets to repay their creditors before they will be granted significant debt relief. Thankfully, very few Chapter 7 filers end up having any of their assets sold by the trustee assigned to their case.
What are exempt and non-exempt assets?
In a Chapter 7 bankruptcy, assets are considered exempt or non-exempt. Non-exempt assets (meaning that they may be liquidated to repay creditors) are generally considered luxury property, such as a vacation home or model car. Exempt assets, like tools of a trade, a primary vehicle or home equity are safe from the risk of liquidation.
What is Chapter 13 bankruptcy?
People who wish to keep their assets and have some disposable income, yet still struggle to pay off their debt may reorganize their debt through a Chapter 13 bankruptcy case. After repaying manageable installments over three-to-five years, they will be granted debt relief for their qualifying balances as well.
What are the downsides to bankruptcy?
You’ll have to determine whether Chapter 7 or Chapter 13 bankruptcy is right for you. There are obvious downsides associated with filing for bankruptcy, like a temporary drop in your credit score. Oftentimes, however, the benefits of bankruptcy outweigh the drawbacks.
How many times can you file for bankruptcy?
You can potentially file for bankruptcy more than once. However, you will have to wait several years before filing again, depending on what kind of bankruptcy you previously filed and which one you’re planning on filing for now.
If you’re convinced that filing for bankruptcy is the best option for you but you still have questions, then you may need to reach out for legal help. Just as there is no shame in seeking debt relief, there is no shame in seeking help in preparing a bankruptcy case either.