Bankruptcy can be an extremely scary yet very liberating process that one may realize is a positive alternative worth pursuing in their lives. No one sets out on a path to declare bankruptcy someday, but it can be reassuring to know that there are definite benefits one can receive if this ends up being the route that they end up taking. From stopping calls from creditors to possibly stopping the repossession of your home or car, to even being able to eliminate a certain percentage of your debt there can be many upsides to what many people consider to be an unfortunate state of affairs to be in. Obviously, there will have to be some hardships and inconveniences that need to be faced as well, which is why it will ultimately be up to the individual on whether or not this particular option is one that will benefit them in the end.
Nonetheless, it is important to have knowledge about all of one’s options in this type of event in order to make the best decision you can going forward.
There are many different reasons why a person can decide to declare bankruptcy, the main being that it offers someone a chance to get a fresh start financially. It can also be a solution that can seem like a miracle to those people that had no other way to catch up with all of their bills or money owed. Just how much debt is forgiven and how big of a hit your credit score will take are items that will depend on your exact financial situation, and while bankruptcy can help people get a clean slate it is not a process that people are allowed to do repeatedly except under very specific circumstances.
Regardless, sometimes after a few big mistakes, all someone needs to be able to start their life over in a productive way is to be able to file bankruptcy in order to do so.
Elimination of any percentage of your debt can be extremely helpful but it is not the only reason why someone would need to take advantage of this process. In addition to eliminating debt it also allows the person failing to pay their child support arrears over a period of time, it may restore their driver’s license if the only reason they were not able to carry one was because of surcharges that were owed and it also may eliminate a certain percentage of any debt that is owed because of income tax. The varying degrees in which all of this is possible again depends on everyone’s unique financial situation, so it is impossible to just list all of the outcomes that would definitely apply to you here.
However, it will definitely benefit you to know all the avenues that are available to you when filing for bankruptcy.
There is also the aspect on whether or not filing for bankruptcy will affect your credit, something that stops many people from even entertaining the idea. The truth is that bankruptcy will affect your credit in a negative way, just how negative depends on your circumstances. The other truth of the matter is that you may already have a low credit score which may be an added benefit of filing for bankruptcy in order to wipe the slate clean.
This is because once a person finds their debt erased by bankruptcy, they will have more money to try and repair their credit over time as they are no longer burdened by the blanket of debt that had been covering them for so long. So while it may, in fact, affect your credit in the short term, as long as you are diligent about staying current with the new payments you will have going forward it is very possible that you will a chance to get your credit score to be the highest it has ever been one day.
If and when you decide that bankruptcy is the correct option for you, there is also the decision on which type of bankruptcy to file: Chapter 7 or Chapter 13. Chapter 7 is known as a liquidation bankruptcy because any assets that you own that are not protected under bankruptcy laws can be sold to repay your creditors. Since most people in this situation do not have more assets than they can protect you can very likely eliminate all of your unsecured debt such as credit card debt or medical bills without losing any of your possessions, an aspect that many people find very attractive. This can be a truly fresh start for people and depending on your income level, it may be the right choice for you.
Chapter 13 bankruptcy is more of a repayment process, one where you can keep all of your assets as long as you fulfill the 3 to 5-year repayment plan on a certain percentage of your debt that is decided on by the courts. This can be beneficial for those who have the means to afford it. Since bankruptcy normally deals with those who are having a hard time coming by funds, it is easy to see why this is not the more typical route.
Regardless of which type of bankruptcy you file it is important to note that not every type of debt can be eliminated through the process. Any student loans, payments for child or spousal support, or any money owed for violating the law are all types of debt that bankruptcy will not be able to help you with. There are many different scenarios that bankruptcy could possibly help you take care of, but these are all classified as the kind of debt that cannot be removed in any way in this fashion. The courts will help you get out of numerous agreements that you originally intended to keep but these type of responsibilities are obligations that you will not be able to get out of no matter what type of bankruptcy you file.