Owing money you can’t afford to pay back is not a situation anyone wants to find themselves in. Nevertheless, it is a growing trend. With credit being easy to obtain and income not necessarily increasing, many may become trapped by bills, collectors, and stress. In these situations, should you file bankruptcy? There may be some pros and cons to the process, but overall, if you qualify for doing so under the laws of your state or federal laws, then you may want to consider it. Become familiar with the process and the different options you have to unload some of your debt.
What Are the Benefits of Bankruptcy?
If you feel like you can not handle your current financial situation, bankruptcy may offer you the relief you need. Perhaps this was a temporary loss of income due to medical illness and bills. With less money coming in, you may have fallen behind on some of your other debts you were able to pay before. With the cycle of late fees and increasing interest rates, your chances of moving forward without intervention may be futile. Filing for bankruptcy is a way you can wipe the slate and get your financial situation back on track. It may allow you the chance to pay down some of your debts while getting rid of the ones you cannot afford.
What Happens if I File Chapter 7?
You may have cash tied up in investments or property. If so, Chapter 7 relief may be a beneficial option for you. A court-appointed trustee goes through your financials and decides what you should keep and what you should cash out. In some situations, you may have to return some secured debts, like boats or vehicles. The lienholder may seize these, wiping out those payments. If this is not enough, assets may be sold. At the end of the process, the rest of your debt may be discharged, starting you back at zero.
What Happens if I File Chapter 13?
Chapter 13 gives you the option of getting on a payment plan. Some assets are exempt, like a primary residence or vehicle. The trustee will meet with creditors to devise a payment arrangement you must follow for a minimum of three years. To stay in good standing, you must make all payments, plus any mortgage or car loan payments not included in the filing. If you stay the course, the judge will likely erase any debt left after the payment plan.
You do not have to declare bankruptcy, but if you have an insurmountable amount of debt, you may want to consider it. A bankruptcy lawyer, like a bankruptcy lawyer in Memphis, TN, can help you decide which course of action to take to get back on your feet.
Thanks to Darrell Castle and Associates, PLLC for their insight into filing for bankruptcy.