When you have tried everything else to get out of debt but have failed, filing for bankruptcy may be your best option. Bankruptcy is a legal way out of debt and a new start for those who can’t pay their debts. It also provides a much-needed respite from a stressful situation by stopping creditors’ daily calls for payment.
People seek bankruptcy protection for many reasons, including unemployment, medical bills and other circumstances that jeopardize their financial stability. They may also consider filing for bankruptcy when faced with the prospect of losing their house or using credit cards to pay down debts as a last resort.
Chapter 7 or Chapter 13?
Before filing for bankruptcy, you need to decide which type best fits your needs.
Chapter 7 bankruptcy, which allows people to sell their assets to pay off debts under the supervision of the court. A court-appointed trustee runs the program, which is not dependent on debt or debtor solvency. A benefit of filing Chapter 7 bankruptcy is the “automatic stay,” which stops debt collectors from harassing you and halts wage garnishment. The moment your documents are filed, the automatic stay goes into effect.
Chapter 13 bankruptcy, which allows debtors to follow a court-approved repayment plan over the course of three to five years to pay off their debt. Filing is possible for individuals with regular income and the ability to satisfy the conditions of the payment plan if their total debt is less than $2.75 million. Once the debts are paid, the bankruptcy will be discharged.
Filing for bankruptcy provides an opportunity for a renewed financial beginning by eliminating the burden of debt for which there is no end in sight. It offers a fresh opportunity for individuals to change their financial circumstances. When you are ready to file for bankruptcy, seek legal guidance with the process.
