Although business bankruptcy filings dropped slightly last year, the government reports that bankruptcy filings for individuals increased significantly. The courts received over 300,000 bankruptcy filings for 2022 and the rate of Chapter 13, or reorganization of debt generally for individuals, increased by more than 30%.
Although these numbers may provide some comfort if you find yourself considering bankruptcy, you are wise if you still find yourself pausing and asking questions. This hesitation shows you are savvy enough to realize there is risk with bankruptcy. These questions help to better ensure you find the right answer to a strong financial future even while trying to dig yourself out of a current financial hole.
Although there are many questions to ask when navigating discussions about bankruptcy, two of the most common questions that can help to determine if bankruptcy is right for you include:
#1: Will it really get rid of my debt?
The answer depends on a number of things including the type of bankruptcy and the type of debt. A Chapter 7 bankruptcy often results in the discharge, or forgiveness, of certain types of debt. Examples can include credit card and medical debt. A Chapter 13 generally leads to a new payment plan, making it easier to pay off otherwise unmanageable debt.
#2: Will it hurt my credit score?
In some situations, yes. In others, it could actually help. This is because every missed credit card payment, every bill that goes ignored, chips away at your credit score. Taking the broad brush of bankruptcy to remove these obligations can be better for your credit score in the long run.
These are just a few of the common questions to ask when considering bankruptcy. Legal counsel can help guide these discussions and give you a better understanding of how bankruptcy would impact your specific situation.
